MI Property & Casualty Insurance Module Training

Underwriters of property or casualty insurance policies commonly use all of the following sources of information when deciding to accept or reject a risk EXCEPT: loss history data genealogical records motor vehicle record credit report

genealogical records When determining whether to accept or reject a risk, underwriters use information from the policy application, agency report, loss history data, motor vehicle record, inspection report and photos, loss control report, and credit report.

An insurance producer whose actions are not authorized by the insurer but which the insurer accepts anyway is demonstrating: A. express authority B. tacit authority C. apparent authority D. implied authority

apparent authority

Michigan's Essential Insurance Act (EIA) states that an individual is eligible for auto insurance if he or she meets any of the following conditions EXCEPT: holds a valid driver license from any state has a car registered in Michigan holds a valid Michigan's driver license has a car to be registered in Michigan

holds a valid driver license from any state EIA states that an individual is eligible for auto insurance if he or she holds a valid Michigan's driver license, or has a car registered or to be registered in Michigan.

Edith wants to insure the office building she owns under a businessowners policy. According to ISO rules, her building is eligible for BOP coverage if it: contains at least one office is five stories tall and has 80,000 square feet. is principally used for business purposes is seven stories tall and has 120,000 square feet

is five stories tall and has 80,000 square feet. Office buildings are eligible if they are not over six stories tall or exceed 100,000 square feet.

Blackroad Company transports hazardous materials by truck. Which requires it to carry certain minimum limits of insurance coverage for doing so? Interstate Commerce Act of 1887 Occupational Safety and Health Act (OSHA) U.S. Constitution's Interstate Commerce Clause Motor Carrier Act of 1980

Motor Carrier Act of 1980 The Motor Carrier Act of 1980 requires certain motor vehicles to carry minimum limits of insurance coverage, which vary according to the type of cargo being transported.

Vinson Used Autos has an inventory valued at $500,000 at two locations. However, its garage policy has a physical damage coverage limit of $350,000. Why should Vinson increase this coverage limit to match the value of its inventory? The coverage is subject to a limit for each covered auto. The coverage limit applies to all of Vinson's locations. Vinson may avoid paying a substantial deductible. The policy requires Vinson to have full insurance to value on all covered autos.

The policy requires Vinson to have full insurance to value on all covered autos. The policy requires the insured to carry full insurance to value on all covered autos at any of its locations or in transit. Coverage is limited to the lesser of actual cash value at the time of loss or the cost to repair or replace the property with like kind and quality, and this coverage is subject to a limit for each covered location. Even if a loss is below the maximum amount shown on the schedule, the insured may recover only a portion of the loss if actual values exceed the limit of insurance.

Who has policy owners and pays policy dividend?

Mutual Company

How much is one tree or shrub covered for?

$500

What is the minimum amount of liability coverage required in a motor vehicle policy issued in Michigan for property damage in any one accident? $20,000 $7,500 $15,000 $10,000

$10,000 In Michigan, the required minimum liability coverage in a motor vehicle liability policy for property damage in any one accident is $10,000 for each motor vehicle.

Workers compensation insurance rates apply to what monetary increment of payroll? $10 $100 $1,000 $10,000

$100 A workers compensation insurance unit of exposure is $100 of payroll.

What is the minimum amount of liability coverage required in a motor vehicle policy issued in Michigan for bodily injury to or death of any one person in any one accident? $10,000 $15,000 $20,000 $25,000

$20,000

What is the minimum amount of liability coverage required in a motor vehicle policy issued in Michigan for bodily injury to or death of more than one person in any one accident? $20,000 $25,000 $30,000 $40,000

$40,000

What is the maximum amount for which the Michigan Property and Casualty Guaranty Association can be liable on a covered claim? $500,000 $1 million $3 million $5 million

$5 million

What is the maximum amount for which the Michigan Property and Casualty Guaranty Association can be liable on a covered claim? $500,000 $1 million $3 million $5 million

$5 million Covered claims do not include that portion of a claim, other than a workers compensation claim or a claim for personal protection insurance benefits, which is in excess of $5 million.

Zenith Restaurant has a business auto policy (BAP) with a $500,000 limit, and a commercial umbrella policy with a $1 million limit and a $10,000 self-insured retention. While driving the company van, Zenith's driver collides with the back of a tour bus. Injured bus passengers' claims and damage to the bus result in a $750,000 judgment against Zenith. How much will be paid by insurer that issued the BAP? $740,000 $240,000 $500,000 $0

$500,000 The BAP insurer will pay the $500,000 limit of the business auto policy, and the umbrella insurer will pay the remaining $240,000 balance of the judgment (i.e., $250,000 minus $10,000 retention).

What are the maximum limits of insurance a business owner can buy to cover the business structure and business contents under a regular flood insurance policy? $250,000 on the building and contents combined $250,000 on the building and $100,000 on the contents $500,000 on the building and $500,000 on the contents $500,000 on the building and $100,000 on the contents

$500,000 on the building and $500,000 on the contents As a business, the maximum available limits under the NFIP are $500,000 for the structure and $500,000 on the contents. If this were a single-family house, the limits would be $250,000 for the structure and $100,000 for the contents.

What is the maximum amount an employer will pay for reasonable funeral and burial expenses if an employee dies as a result of a work-related injury? $7,500 $6,000 $5,000 $3,000

$6,000

An insurer or producer must notify its current customers of its privacy policies or practices at least once every how often? 6 months 12 months 18 months 24 months

12 months

What is the minimum amount of liability coverage required in a motor vehicle policy issued in Michigan for bodily injury to or death of any one person in any one accident? $20,000 $15,000 $10,000 $25,000

20,000 In Michigan, the required minimum liability coverage costs in a motor vehicle liability policy for bodily injury or death of any one person in any one accident is $$20,000 for each motor vehicle.

What is the continuing education requirement for Michigan producers? 30 hours 20 hours 24 hours 12 hours

24 Hours

The Special Provisions-Michigan (DP 01 21 04 12) endorsement states that a suit against an insurer must begin within what time period after the date of loss? six months 12 months 18 months 24 months

24 months

A leased auto may be listed in the declarations in a personal auto policy (PAP) if it is leased to the named insured under a written contract for at least: 3 months 6 months 9 months 12 months

6 months A leased vehicle will be treated as an owned vehicle if it is leased to the named insured under a written contract for at least six months.

How can an employer that is not legally required to provide workers compensation benefits to a certain class of its employees ensure that they have access to statutory workers compensation benefits? Add the Waiver of Our Right to Recover from Others Endorsement to its workers compensation policy. There is no way to provide workers compensation benefits to employees considered to be exempt. Add a workers compensation endorsement to its commercial general liability (CGL) policy. Add the Voluntary Compensation and Employers Liability Coverage Endorsement to its workers compensation policy.

Add the Voluntary Compensation and Employers Liability Coverage Endorsement to its workers compensation policy. The Voluntary Compensation and Employers Liability Coverage Endorsement is attached when an insured wishes to offer statutory benefits to exempt employees.

What is an admitted compnay?

An admitted company need's a certifican of authority

To discipline his teenage daughter Annie, Alvin forbids her from using the family car. Annie steals the keys and drives the car to a party. She causes an accident that severely injures the other driver. Who, if anyone, is covered by Alvin's personal auto policy (PAP)? Alvin is covered, but Annie is not. Neither Annie nor Alvin are covered. Annie is covered because she is a family member, and Alvin is also covered. Annie is covered, but Alvin is not.

Annie is covered because she is a family member, and Alvin is also covered. The nonpermissive use exclusion does not preclude coverage for a family member using a covered auto owned by the named insured.

Define fiduciary:

Anyone who is cited in a benefit plan document, as well as anyone who is considered to have decision-making power over the management of the plan and its assets, can be regarded as a fiduciary.

Under the broad causes of loss form of a farm property policy, which of the following losses to livestock would NOT be covered? Some livestock are electrocuted when a live power line falls into their pasture. Wolves attack and kill several of the farm's sheep. Bovine flu kills the farm's most productive milk cow. A bull strays onto the highway where it is struck and killed by a Mack truck.

Bovine flu kills the farm's most productive milk cow. Regarding the death of livestock, communicable disease is not a covered peril under the basic and broad causes of loss forms.

What does section II of the homeowners policy cover?

Liability coverages

When she is about to retire, Cindy learns that she will not collect the pension she had been expecting because her employer's corporate pension plan has become insolvent. All the following might be held liable for the plan's insolvency EXCEPT: Cindy's personal financial advisor the plan's investment advisor the bank that holds the pension plan's funds the trustees at the corporation that sponsored the plan

Cindy's personal financial advisor Cindy's personal financial advisor had nothing to do with designing her employer's pension plan.

With respect to requirements for a valid contract, a policyowner's payment of the policy premium is considered an: Consideration Counteroffer Offer Acceptance

Consideration

With the dwelling policy, which of the following coverages receives loss settlement on a replacement cost basis on the DP 2 and DP 3 forms? Coverage A - Dwelling Coverage C - Personal Property Coverage D - Fair Rental Value Coverage E - Additional Living Expenses

Coverage A - Dwelling On dwelling policy forms DP 2 and DP 3, losses under Coverage A - Dwelling and Coverage B - Other Structures are settled on a replacement cost basis. Personal property is covered on a replacement cost basis.

Dalton rents an unfurnished house. Dalton's dwelling policy is most likely to have Coverage C-Personal Property and: Coverage E-Additional Living Expense Coverage D-Fair Rental Value Coverage C-Personal Property Coverage B-Other Structures

Coverage E-Additional Living Expense Coverage E covers the additional living expenses-less normal expenses-that Dalton might incur to maintain his normal standard of living while he is unable to live in the house because of damage by a covered peril.

Vandals paint graffiti on the garage door of a house. Which dwelling form(s) cover this loss? DP 1, 2, and 3 only the DP 3 Vandalism is an optional coverage for an additional premium charge in all three forms. DP 2 and 3; coverage is optional in the DP 1

DP 2 and 3; coverage is optional in the DP 1

An earthquake ruptures a natural gas line, which starts a fire that damages Mary's home. Is the damage covered under her dwelling policy? Damage caused by the earthquake is excluded. Damage from the ensuing fire is covered. No. The proximate cause of the loss was earthquake, which the policy excludes. Loss caused by the earthquake and the resulting fire is covered. Damage from the earthquake is covered, but the loss due to fire is excluded.

Damage caused by the earthquake is excluded. Damage from the ensuing fire is covered.

Explain the difference between Domestic, Foreign, and Alien:

Domestic is native to state, foreign is from outside of the state, and alien is from outside of the country.

Define dram shop laws?

Dram shop laws allow victims in a drunk driving accident to place blame on the restaurant or bar that served the intoxicated driver.

What does HO3 cover?

Dwelling and other structures on an open perils basis; personal property on a named perils basis: loss of use, personal liability, and medical payments

What does HO 2 cover?

Dwelling, other structures, and personal proepty on a named perils basis: loss of use, personal liability, and medical payments.

What is the Federal trade commision act?

Empowers the agency to investigate and prevent unfair methods of competition, and unfair or deceptive acts or practices affecting commerce. The main goal is to protect competition and protect consumers.

What is HO8 tailored towards?

For older home when their replacement cost may substantially exceed their market value: dwelling and other structures based on the amount needed to repair or replace the property using common construction materials and methods; loss of use, personal liability, and medical payments.

What does HO6 cover?

For owners of condominiums and cooperative aparments: personal property on a named perils basis, limited dwelling coverage, loss of use, personal liability, and medical payments.

Which homeowners form provides open perils coverage on the home, named perils coverage on personal property, and personal liability coverage? HO-2 Broad Form HO-3 Special Form HO-4 Contents Broad Form HO-5 Comprehensive Form

HO-3 Special Form

Graham receives workers compensation wage loss benefits from Employer A. He goes to work for Employer B and receives an average weekly salary greater than the average weekly wage from Employer A. Is he entitled to wage loss benefits while working for Employer B? He is entitled to benefits equal to the difference between the two average weekly wages. He is entitled to benefits for the injury sustained while working for Employer A because it is a permanent injury. He is not entitled to any wage loss benefits unless he sustains a new compensable work-related injury while working for Employer B. He is entitled to benefits but must return the excess wages from Employer B to Employer A.

He is not entitled to any wage loss benefits unless he sustains a new compensable work-related injury while working for Employer B. If an employee is employed subsequent to his or her injury and the average weekly wage of the employee is now equal to or more than the average weekly wage the employee received before the date of injury, the employee is not entitled to any wage loss benefits for the duration of that employment.

Damien moves to another state, so his insurer issues a different personal auto policy. Damien notices that it has a personal injury protection endorsement that his former policy did not have. What is the purpose of this endorsement? It adds no-fault coverage that is available or required in the new home state. It protects against claims for libel, slander, and other offenses. It provides better coverage for rented cars. It protects against reckless and aggressive drivers.

It adds no-fault coverage that is available or required in the new home state. In states where no-fault insurance is available, the policy is modified by adding a personal injury protection endorsement.

How is personal liability coverage provided on a dwelling fire policy? It's only included on the DP 2 and DP 3. It's included on all three dwelling forms. It can't be provided by a dwelling policy. It can only be provided by endorsement.

It can only be provided by endorsement.

Define vicarious liability

Liability that a supervisory party (employer) bears for the actionable ocnduct of subordinate associated (employee) based on the relationship between the two parties.

Lambert Jewelers' BOP doesn't provide adequate coverage for jewelry and gems it owns, jewelry in its care that is owned by customers, and assorted items of property. What kind of commercial inland marine coverage do you recommend? Jewelers Block Installation Floater EDP Floater Commercial Articles Floater

Jewelers Block

Under the Special Provisions-Michigan (HO 01 21 05 11) endorsement, if Sarah's existing homeowners policy will terminate at noon standard time on June 16, when will her new homeowners replacing policy be effective? June 15th at midnight June 16th at midnight June 16th immediately after termination of her existing homeowners policy June 15th at noon standard time

June 16th immediately after termination of her existing homeowners policy The Special Provisions-Michigan (HO 01 21 05 11) endorsement states that if coverage under an existing policy will terminate at noon standard time of day one of a replacing policy, the effective time for the replacing policy begins only after termination of the replaced coverage.

Under the NFIP, which of the following properties would most likely be covered under the general property form for residential buildings? Metropole Apartments Neon Nights Motel The Germania House, a bed-and-breakfast inn Shady Grove nursing home

Metropole Apartments The general property form is used for both residential and nonresidential properties. When applied to residential buildings, it can cover apartment buildings, assisted-living facilities (distinct from nursing homes), and hotels and motels with more than four units where the normal guest occupancy is at least six months.

If Johnny leaves his keys in his car overnight and it is stolen what type of hazzard is this?

Morale

Who transport their own cargo and hired cargo?

Motor carrier policy

Jack is selling his home to Sue and wants to transfer his homeowners policy to her. Can Jack transfer his policy? Yes, insurance policies have a certain portability to them which makes this possible. No, this cannot be done under any circumstances. No, unless the insurer gives written consent to do so. Yes, if Jack and Sue became joint insureds.

No, unless the insurer gives written consent to do so.

All of the following are considered employees while performing consulting services for the insured EXCEPT: Paul, an independent contractor Arlene, a former employee of the insured Josie, a former partner of the insured Matthew, a former manager in the insured's company

Paul, an independent contractor Former employees, partners, directors, trustees, and limited liability company members and managers are considered employees while performing consulting services for the insured. Independent contractors are not considered employees of the insured business. Instead, they are self-employed.

All of the following are considered employees while performing consulting services for the insured EXCEPT: Paul, an independent contractor Arlene, a former employee of the insured Josie, a former partner of the insured Matthew, a former manager in the insured's company

Paul, an independent contractor Former employees, partners, directors, trustees, and limited liability company members and managers are considered employees while performing consulting services for the insured. Independent contractors are not considered employees of the insured business. Instead, they are self-employed.

What is a fidicuary?

Person in trust

What does section I of the homeowners policy cover?

Property

What can cancel insurance in the first 55 days of policy?

Recovation of licenses

What does the McCarran-Furguson Act do?

Regulates insurance, the act was designed to ensure the preeminence of state regulation not to free insurers from federal antitrust laws.

Who has stockholders and pays dividends?

Stock Company

All of the following statements about a commercial general liability policy with a claims-made form are true EXCEPT: Coverage is triggered when the bodily injury or property damage occurs. The claim must be made during the policy period. The act causing the claim must have taken place on or after the policy's retroactive date. A claims-made CGL policy is not required to have a retroactive date.

The act causing the claim must have taken place on or after the policy's retroactive date. Under the claims-made form, the filing of a claim during the policy period triggers coverage. For coverage to apply, the claim must be made against the insured during the policy period, and the act giving rise to the claim must have occurred on or after the policy's retroactive date. Not every claims-made CGL policy has a retroactive date.

What is the agreement to a policy?

The premium paid

Which of the following entities is NOT eligible for the businessowners policy? Botany Place Residential Condominium Association Crepe Suzette's Cafe Happy Family Grocery Mart Valley Bank & Trust

Valley Bank & Trust

Mary adopted an assumed name, Insurance Advocates, for the purpose of marketing her insurance business. Later, she decides to adopt a more suitable name. Can she change the assumed name? No. Once chosen, an assumed name may not be changed. No. Although assumed names are allowed, the Director discourages their use. Yes. She must notify the Director before using the assumed name. Yes. She must notify the Secretary of State before using the assumed name.

Yes. She must notify the Director before using the assumed name.

All the following are generally eligible for a business owners policy (BOP) EXCEPT: a retail store in a building with an area of 5,000 square feet a manufacturer leasing 10,000 square feet of spaces a six-unit apartment building a self-storage facility

a manufacturer leasing 10,000 square feet of spaces

A property or liability insurance policy may provide secondary coverages along with the main coverage in its insuring agreement through all of the following EXCEPT: alternative payments coverage extensions additional coverages supplementary payments

alternative payments Sometimes, a policy will provide secondary coverages along with the main coverage in its insuring agreement. These coverages may be labeled as coverage extensions, additional coverages, or supplementary payments.

An ISO liquor liability coverage form includes two limits of insurance, called: an aggregate limit and an each common cause limit a per-person limit and a per-occurrence limit a per-claim limit and an each common cause limit an aggregate limit and a per-occurrence limit

an aggregate limit and an each common cause limit The ISO liquor liability policy provides an aggregate limit and an each common cause limit.

How many days' notice must an insurer provide each named insured in a fire insurance policy if the insurer decides to cancel the policy? at least 10 days at least 15 days at least 20 days at least 30 days

at least 10 days

If the insurer intends to nonrenew personal auto policy (PAP) coverage, it is required to notify the named insured: no more than 30 days before the policy expires at least 90 days before the policy expires no more than 15 days before the policy expires at least 20 days before the policy expires

at least 20 days before the policy expires The nonrenewal provision in the PAP requires the insurer to notify the named insured at least 20 days before the policy expires if the insurer intends to nonrenew coverage.

Eliza's car is insured with a personal auto policy that includes liability, collision, and other-than-collision coverages. She buys a pickup truck. What coverage, if any, will the PAP provide for the truck? automatic liability coverage for the remainder of the policy period automatic liability coverage if she reports the newly acquired vehicle to the insurer within 14 days. none because the newly acquired vehicle is a truck automatic collision coverage if she reports the newly acquired vehicle to the insurer within 30 days

automatic liability coverage if she reports the newly acquired vehicle to the insurer within 14 days. Because the truck is an additional vehicle, it has automatic liability coverage immediately. Eliza must notify the insurer within 14 days to add the truck to her policy.

In calculating a workers compensation premium, an experience modifier ("mod") of 1.0 indicates; higher-than-average loss experience uncertainty about the employer's loss experience lower-than-average loss experience average loss experience

average loss experience An experience modifier ("mod") of 1.0 indicates average loss experience (compared with other employers in the same business). A debit modifier (greater than 1.0) indicates higher-than-average losses while a credit modifier (less than 1.0) indicates lower-than-average losses.

What term involves physical harm to, or impairment of, the body? bodily damage property damage occurrence bodily injury

bodily injury The homeowners policy forms define "bodily injury" as bodily harm, sickness, or disease, which includes required care, loss of services, and resulting death. In other words, bodily injury involves physical harm to, or impairment of, the body.

Which part of the business auto policy (BAP) contains information the applicant provided to tailor the coverage for the applicant's needs? nuclear energy liability exclusion endorsement common policy conditions form business auto declarations business auto coverage form

business auto declarations Most of the information in the business auto declarations reflects information the applicant provided in the insurance application. The BAP uses this information to tailor coverage to meet the particular needs of the insured.

With respect to property insurance underwriting, what type of rating system is used when insureds share similar characteristics? individual rating class rating group rating state-based rating

class rating With class rating, most commonly used with high-volume insurance coverages, such as auto and homeowners insurance. insureds sharing similar characteristics are charged the same rates. Individual rating is used when each insured is unique and cannot readily be placed into a class with similar insureds.

Which of the following perils is included on the commercial property Broad Causes of Loss Form but NOT on the Basic Causes of Loss Form? fire collapse smoke vandalism

collapse

All of the following losses are subject to limits under a businessowners policy (BOP) EXCEPT: damage caused by lightning loss to steam boilers caused by internal conditions missing property, unless there is evidence to show what happened to it breakage of fragile articles

damage caused by lightning Lightning damage is covered with no limitation other than the limit of liability on the property. Damage is subject to the deductible.

Which of the following are additional coverages under a businessowners policy? pollutant clean-up and removal, debris removal, and earthquake debris removal, fire department service charges, and preservation of property debris removal, preservation of property, and flood debris removal, pollutant clean-up and removal, and nuclear hazard

debris removal, fire department service charges, and preservation of property Debris removal, fire department service charges, and preservation of property are among the additional coverages of a businessowners policy. Earthquake, flood, and nuclear hazard are not.

Ari is sued and tells his insurer the lawsuit is without merit. Even if Ari is telling the truth, the insurer still owes him a duty to: settle the claim pay the original claim pay damages and attorney costs defend

defend The insurer has a duty to defend the insured, at the insurer's expense, and attempt to prove the insured is not legally responsible for the loss and is not legally required to pay damages.

Which is NOT one of the three major parts of a personal auto policy (PAP)? applicable endorsements declarations page personal auto coverage form definitions

definitions Although the PAP definitions are important to the policy, they are not one of its three major parts.

Patrick has a commercial property insurance policy that does not cover damage caused by an earthquake. He is interested in obtaining earthquake coverage. He read that it is possible to obtain a separate policy insuring against this specific peril and it was referred to as a(n): supplemental policy difference-in-conditions policy open perils policy named perils policy

difference-in-conditions policy A difference-in-conditions (DIC) policy is a property insurance policy that is purchased in addition to a commercial property policy to obtain coverage for perils, like flood and earthquake, that the commercial property policy does not cover.

Which of the following causes of a mechanical breakdown of equipment would be covered? electrical arcing freezing caused by record-breaking frigid weather flood explosion of unconsumed fuel

electrical arcing Breakdowns due to power surges, including those caused by electrical arcing, are a covered peril under the equipment breakdown form. The other causes of loss in this question are not covered perils.

Farm Liability Coverage Form (FL 00 20) provides all of the following coverages EXCEPT: personal injury and advertising injury (Coverage I) bodily injury and property damage (Coverage H) medical payments (Coverage J) farm personal property (Coverage E)

farm personal property (Coverage E) This standard coverage form provides three basic coverages against claims arising from the policyholder's insured locations, farming operations and products: bodily injury and property damage (Coverage H), personal injury and advertising injury (Coverage I), and medical payments (Coverage J). Farm personal property (Coverage E) is a farm property form, not a liability form.

The dwelling policy DP 3 Special Form excludes coverage for loss due to water damage by all the following means EXCEPT: fire that results from water damage flood sewer backup underground seepage

fire that results from water

The Special Provisions-Michigan (HO 01 21 05 11) endorsement describes the duties an insured owes an insurer after an occurrence. If the insured does not perform these duties, the insurer can void the policy will cancel the policy has no duty to provide coverage for the occurrence must still provide coverage for this occurrence

has no duty to provide coverage for the occurrence

What does loss of use cover in Dwelling policies?

helps pay for the additional costs you might incur for reasonable housing and living expenses if a covered event makes your house temporarily uninhabitable while it's being repaired or rebuilt.

Property coverage under a dwelling policy is excluded for all the following causes of loss EXCEPT: failure to act in the face of an impending loss mudslides internal explosion neglect

internal explosion

Unlike an insurance policy, a surety bond: covers only fortuitous losses is independent of other contracts can usually be canceled at any time is a three-party contract

is a three-party contract Three parties-the principal, the obligee, and the surety-are involved in a bonding relationship.

Embezzlement

is theft by an employee, typically achieved in the course of the employee's performance of his or her duties.

Lucy's space heater causes a fire that results in $200,000 in damage to the office building she rents. Although the loss is within the $300,000 general aggregate limit of her commercial general liability insurance policy, the insurer pays only $100,000 of the property damage claim because of the policy's: limit on damage to premises rented to you each-occurrence limit products-completed operations aggregate personal and advertising injury limit

limit on damage to premises rented to you Under the CGL policy, damage to any one premises that the insured rents is limited to $100,000 in any one occurrence. This is a sublimit to the each-occurrence limit.

Define pro rata:

means that claims are only paid out in proportions to the insurance interest in the asset.

Following an unusually heavy rainstorm, Polly's building was damaged when flowing mud flowed down from the hillside above her home. According to the National Flood Insurance Program (NFIP), what did Polly experience? mudflow, which is a type of flood soil erosion, which is normal and expected and is therefore excluded earth movement, which is an excluded peril avalanche, which is not considered a flood

mudflow, which is a type of flood The NFIP definition of flood includes mudflow, which is a river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water.

With the commercial property policy, which causes of loss form(s), if any, would cover the insured's exposure to weight of ice and snow? both the basic and broad causes of loss forms no causes of loss form only the broad form causes of loss form only the basic causes of loss form

only the broad form causes of loss form Losses caused by the weight of ice or snow and collapse are covered under the causes of loss broad form, but not the basic form.

A business that wants its commercial general liability policy to provide pollution coverage that includes cleanup costs would want the: pollution liability coverage form pollution liability limited coverage form limited fungi or bacteria coverage mold extension coverage

pollution liability coverage form

Trumbull Motors' liability policy paid first when its employee was test-driving and caused an accident. Which of the following terms correctly describes what type of coverage Trumbull Motors' policy provides? primary excess supplemental concurrent

primary Primary insurance pays claims before all other applicable insurance pays.

Mrs. Grant's home suffered a fire. The contractor tells Mrs. Grant it will cost $10,000 to repair the damage and restore her home so it's exactly the same as it was before the fire. What valuation basis did the contractor explain to Mrs. Grant? replacement value market value actual cash value agreed value

replacement value

Which of the following is a coverage option that is available in a standard equipment breakdown policy? corrosion spoilage damage smoke damage internal dry rot

spoilage damage As long as the insured is legally responsible for the damaged property, spoilage damage is a covered peril. Dry rot, corrosion, and smoke damage are not coverage options.

Lloyd Corporation operates in a state with neither a monopolistic nor a competitive state fund for workers compensation insurance. Due to its past loss experience, Lloyd Corporation cannot find a private insurer willing to provide its workers compensation insurance. Lloyd may, however, be able to purchase workers compensation insurance from the: Federal Employers Liability Agency state residual market facility state department of insurance Federal Emergency Management Agency

state residual market facility Employers that cannot purchase workers compensation insurance in the voluntary market can purchase it from the state residual market facility.

The business auto policy (BAP) provides the broadest possible liability coverage when what symbol is used for liability? symbol 10 symbol 1 symbol 2 symbol 7

symbol 1 When symbol 1 is selected, any auto-whether owned, nonowned, hired, or otherwise-is protected by that coverage.

Mollie's business auto policy (BAP) must provide liability coverage for all owned, nonowned, and hired autos and physical damage comprehensive coverage for all owned private passenger autos. The declarations of her business auto policy should have: symbols 2, 8, and 9 for liability coverage and symbol 4 for comprehensive coverage symbol 3 for liability coverage and symbol 1 for comprehensive coverage symbol 1 for liability coverage and symbol 4 for comprehensive coverage symbol 1 for liability coverage and symbol 3 for comprehensive coverage

symbol 1 for liability coverage and symbol 3 for comprehensive coverage Symbol 1 shows coverage for any auto, and symbol 3 shows coverage for owned private passenger autos.

Muller's Floral Shop uses vans to deliver flowers and is insured with a business auto policy. It wants auto liability coverage on all autos, but medical payments, UM/ UIM, and physical damage coverage only on owned autos. Which symbols does Muller's insurance agent recommend for these coverages? symbol 2 for all vehicles and coverages symbol 7 for liability on owned vehicles; symbol 4 for medical payments, UM/UIM, and physical damage coverage symbol 1 for liability coverage on any auto; symbol 2 for medical payments, UM/UIM, and physical damage coverage on owned autos symbol 7 for liability, medical payments, UM/UIM, and physical damage coverages on all owned autos

symbol 1 for liability coverage on any auto; symbol 2 for medical payments, UM/UIM, and physical damage coverage on owned autos

Which covered auto symbol is used to designate owned autos on the business auto policy? symbol 1 symbol 2 symbol 3 symbol 4

symbol 2

Vicky's business is located in a state that requires uninsured motorists coverage. What symbol will indicate this coverage in her business auto policy (BAP)? symbol 6 symbol 3 symbol 5 symbol 1

symbol 6 Symbol 6 denotes mandatory uninsured motorists coverage. It cannot be waived.

Which of the following is a "hired auto" under the Hired and Non-owned Liability endorsement that may be added to Gateway Motel's BOP? the company car owned by Gateway and used by an employee the car owned by the owner of Gateway Motel the car owned by an employee of Gateway Motel the car rented by Gateway Motel

the car rented by Gateway Motel

A flood swept some of Bridgette's flood-damaged property onto a neighbor's land, and it swept some of a neighbor's flood-damaged property onto Bridgette's land. The debris removal coverage in Bridgette's National Flood Insurance Policy will pay for removing all the following debris EXCEPT: the neighbor's property on the neighbor's land Bridgette's property on Bridgette's land the neighbor's property on Bridgette's land Bridgette's property on the neighbor's land

the neighbor's property on the neighbor's land Debris removal coverage pays for the removal of neighbors' debris on the insured's property and pays for removing debris of covered property regardless of where the debris is located.

An insurer that decides to cancel a PAP after it has been renewed can do so if the insured was cited for a moving violation. the renewal occurred within the last 60 days. the premium payment was received after the due date. the policy was obtained through a material misrepresentation.

the policy was obtained through a material misrepresentation. A PAP that has been in effect for at least 60 days or renewed can be cancelled only for nonpayment of premium, for suspension or revocation of the insured's driver's license, or because the policy was obtained through material misrepresentation.

Car Dealer was offering a free TV with the purchase of any new car. When a man in the showroom picked up a TV and carried it out of the showroom, the sales manager held the door open, assuming the man had just bought a car. He had not. What is Car Dealer the victim of? robbery embezzlement theft burglary

theft No break-in or break-out was involved as is required by the traditional definition of burglary, but the man was in the showroom to steal property. No force or threat of force was involved in this act of stealing, so it was not a robbery. Embezzlement requires that victim place the person stealing the property in a position of trust to handle the property.

All of the following perils are covered on an unendorsed DP 2 Broad Form dwelling policy EXCEPT: falling objects weight of ice, snow, or sleet burglary damage theft

theft The peril of theft is not included on any of the dwelling forms; it can only be purchased by endorsement.

In the liability section of a homeowners policy, "business" refers to a full-time, part-time, or occasional trade, profession, or occupation a person engages in for money or other compensation of at least: $100 per year $500 per year $2,000 per year $10,000 per year

$2,000 per year "Business" refers to a full-time, part-time, or occasional trade, profession, or occupation as well as other activities a person engages in for money or other compensation of at least $2,000 per year.

If the bus drivers employed by a business are assigned a workers compensation classification code with a rate of $2.50 and the employer has payroll of $100,000 for that classification code, what is the unmodified premium for that classification? $25,000 $2,500 $250 $25

$2,500 A preliminary unmodified premium is determined by multiplying the appropriate rates for the applicable job classification by the premium basis. The unmodified premium for the bus driver classification would be $2.50 multiplied by $100,000 divided by $100, or $2,500.

What is the maximum amount for which the Michigan Property and Casualty Guaranty Association can be liable on a covered claim? $3 million $5 million $1 million $500,000

$5 million Covered claims do not include that portion of a claim, other than a workers compensation claim or a claim for personal protection insurance benefits, which is in excess of $5 million.

If Special Provisions-Michigan (DP 01 21 04 12) is added to a dwelling policy, within how many months after the date of loss must an insured bring suit against an insurer? 18 months 12 months 24 months 6 months

24 Months A suit against an insurer must begin within two years after the date of loss. The time for beginning an action starts when the insured notifies the insurer of the loss and the insurer denies liability.

Stellar Restaurant has a business auto policy (BAP) with a $500,000 limit, and a commercial umbrella policy with a $1 million limit and a $10,000 self-insured retention. While delivering food with the company van, Stellar's driver collides with a commuter bus. Injured bus passengers' claims and damage to the bus result in a $750,000 judgment against Stellar. How much will be paid by the insurer that issued the commercial umbrella policy? $240,000 $500,000 $740,000 $0

240,000 The BAP insurer will pay the $500,000 limit of the business auto policy, and the umbrella insurer will pay the remaining $240,000 balance of the judgment (i.e., $250,000 minus $10,000 retention).

Jane has an older car that is insured, although the policy does not cover physical damage. She buys a new car and wants to include collision and other than collision coverages on the new car. To have her insurer add these coverages, she must ask the insurer to provide this coverage within: any time during the policy period 15 days 10 days 4 days

4 days

Under the protective safeguards endorsement on a businessowners policy (BOP), if an automatic sprinkler system is impaired, the insured does not need to notify the insurer of the impairment if it is resolved within: 12 hours 30 days 7 days 48 hours

48 hours The protective safeguards endorsement on a businessowners policy (BOP) excludes coverage for loss by fire if the insured knew that the safeguard was impaired but failed to notify the insurer, but the insured does not need to notify the insurer of the impairment if it is resolved within 48 hours.

Robert is having a home built, which is 50 percent completed. He protects it with a dwelling policy that includes the Dwelling Under Construction endorsement. If lightning were to strike and destroy it, what (if anything) would the policy pay? the projected completed value of the property nothing, as the home had no insurable value until it was completed 50 percent of the coverage A limit the value of materials used in building the house at the point it was destroyed

50 percent of the coverage A limit

If Mary Beth suffers a temporary total disability due to a work-related accident, what percentage of her wages will she receive during the disability period? 50% 66.66% 75% 80%

80%

What is the % received for total temporary disability?

80%

Which of the following statements correctly describes the difference between an open perils policy and a named perils policy? A named perils policy covers many more causes of loss than an open perils policy. A named perils policy requires the policyowner to show the cause of loss is covered, while the insurer has the burden of proving that the loss is excluded with an open perils policy. A named peril policy excludes certain types of peril, while an open perils policy covers virtually every possible cause of loss. Open peril policies are less expensive than named peril policies.

A named perils policy requires the policyowner to show the cause of loss is covered, while the insurer has the burden of proving that the loss is excluded with an open perils policy.

Which of the following statements correctly describes the difference between an open perils policy and a named perils policy? A named perils policy covers many more causes of loss than an open perils policy. A named perils policy requires the policyowner to show the cause of loss is covered, while the insurer has the burden of proving that the loss is excluded with an open perils policy. A named peril policy excludes certain types of peril, while an open perils policy covers virtually every possible cause of loss. Open peril policies are less expensive than named peril policies.

A named perils policy requires the policyowner to show the cause of loss is covered, while the insurer has the burden of proving that the loss is excluded with an open perils policy.

Which is NOT a risk that is typically placed with an excess or surplus lines insurer? A risk that is covered by at least one admitted insurer A risk that cannot be placed in conventional markets An unusual risk for which demand for coverage is low A substandard risk due to adverse loss experience

A risk that is covered by at least one admitted insurer Risks placed in the excess and surplus lines markets are usually substandard due to adverse loss experience, unusual because there is little demand for the product in the state, or unable to be placed in conventional markets due to a shortage of capacity.

ABC Company's insurance agent has informed ABC that its current workers compensation policy has a 1.3 experience modifier but its renewal policy will have a 1.1 "mod" which means: ABC's loss experience was worse than average and is getting worse. ABC's loss experience was better than average and is getting even better. ABC's loss experience was worse than average but is getting better. ABC's loss experience was better than average but is getting worse.

ABC's loss experience was worse than average but is getting better. An experience modification factor (mod) greater than 1.0 indicates that the employer's loss experience during the relevant period was worse than that of others in the same class. In this case, the lower renewal mod indicates that ABC's experience is improving and the premium will decrease.

Superior Motors sells new cars which it insures with a garage policy. Which liability claim would the policy NOT cover? An employee is injured while test-driving a customer's car. A customer is injured after slipping and falling on a puddle in the showroom. Workmen are replacing a windowpane in the showroom when it falls and injures a customer. An accident results from a faulty repair of a customer's brakes.

An employee is injured while test-driving a customer's car. The garage policy will not cover an employee's work-related injuries that would be covered by workers compensation.

For workers compensation purposes, when is a disability caused by a work-related injury considered to be a total disability? An employee is unable to obtain suitable employment. An employee is unable to obtain a job suitable to his or her qualifications and training that pays an appropriate wage. An employee is unlikely to earn wages in any type of work. An employee is unlikely to earn more than minimum wages even if re-trained in a new skill.

An employee is unable to obtain a job suitable to his or her qualifications and training that pays an appropriate wage. A disability is total if the employee is unable to obtain work suitable to his or her qualifications and training and is unable to obtain any suitable job paying the employee's maximum wage earning capacity at the time of injury.

How many days' notice must an insurer provide each named insured in a fire insurance policy if the insurer decides to cancel the policy? at least 10 days at least 30 days at least 15 days at least 20 days

At least 10 days A fire insurance policy may be canceled at any time by the insurer by mailing a written notice of cancellation to each insured named in the policy. The notice must be mailed at least 10 days before the effective cancellation date.

How much advance notice must an insurance company give its policyholder if it does not intend to renew a personal auto policy? At least 7 days At least 10 days At least 20 days At least 14 days

At least 20 days Before an insurance company refuses to renew a personal auto policy, it is required to give the policyholder at least 20 days' written notice in advance.

Which coverages does the standard farm liability coverage form provide? Bodily injury, personal injury, and medical payments Bodily injury and property damage, personal injury and advertising injury, and medical payments Property damage, advertising injury, and medical payments Bodily injury, advertising injury, and medical payments

Bodily injury and property damage, personal injury and advertising injury, and medical payments The standard farm liability form provides coverage for bodily injury and property damage (Coverage H), personal injury and advertising injury (Coverage I), and medical payments (Coverage J), all on an occurrence basis.

A businessowners property coverage applies to Real estate and improvements Buildings alone Business personal property Buildings, business personal property, or both

Buildings, business personal property, or both A BOP's property coverage applies to buildings, business personal property, or both. The declarations give a dollar limit for each category of covered property.

Nelson is the president of his company and has a company car. He does not have a personal auto policy because he does not own another vehicle. Which endorsement to his company's business auto policy (BAP) will protect him when he uses another vehicle? Employees as Insureds Drive Other Car-Broadened Coverage for named Individuals Individual Named Insured Hired Autos Specified as Covered Autos You Own

Drive Other Car-Broadened Coverage for named Individuals The Drive Other Car endorsement is useful for those whose only vehicle is a company car. It is excess coverage when the individual drives an auto that is borrowed or hired for personal use.

An equipment breakdown policy typically would NOT cover which of these incidents? Failure of a punch press due to a broken ram. Failure of a die cutter due to an electrical short. Failure of a hydraulic lift due to a vacuum leak. Failure of a conveyer belt due to extended use.

Failure of a hydraulic lift due to a vacuum leak. An equipment breakdown policy defines breakdown to include pressure or vacuum equipment failure, mechanical failure, and electrical failure. It excludes coverage for equipment parts that are normally subject to periodic replacement or routine maintenance.

Which of the following activities is covered under the basic farm liability coverage form (FL 00 20)? Farmer uses her pony to give rides to children at a local charity's event. Farmer hires a crop duster whose pesticides injure another farmer's livestock in a neighboring field. Farmer operates a mower mounted on his tractor in his own hay field. Farmer earns $10,000 by using her combine to harvest neighboring farmers' crops.

Farmer operates a mower mounted on his tractor in his own hay field. Although the farm liability coverage form contains an exclusion for mobile equipment, that applies only to the transportation of mobile equipment by a motor vehicle. No coverage is provided for losses due to custom farming, aircraft discharge (crop dusting), or use of livestock to provide rides for a fee or in connection with a charitable function.

What does the limited pollution liability extension endorsement do when added to the CGL insurance policy? It expands pollution coverage. It broadens the policy's definition of pollutants. It excludes pollution coverage. It limits pollution coverage to losses arising from bacteria and fungi.

It expands pollution coverage. The endorsement replaces the CGL pollution liability exclusion with broader coverage for pollution.

Hart Food Supply was forced to shut down when the electrical service to its building was disrupted due to a motor vehicle accident that took place on the other side of town. How will the Special Causes of Loss Form on Hart's commercial property policy respond to its claim for spoiled inventory? It will pay the claim after applying the deductible. It will pay the claim; no deductible applies to coverage for power failure. It will deny the claim under the Loss of Market exclusion. It will deny the claim under the Off-Premises Utility Service Interruption exclusion.

It will deny the claim under the Off-Premises Utility Service Interruption exclusion.

Tyler accompanies Janelle while she visits their employer's customers. Janelle's company car has liability coverage under their employer's business auto policy (BAP). She crashes into a lamppost and Tyler is injured. He sues Janelle for his injuries. How will the BAP treat his lawsuit? It will not cover the loss because of the fellow employee exclusion. It will cover his loss if he pays a deductible. It will cover his loss if he proves that Janelle's negligence caused it. It will not cover the loss because of the contractual liability exclusion.

It will not cover the loss because of the fellow employee exclusion. The BAP's fellow employee exclusion precludes coverage for bodily injury to an employee arising out of and in the course of a fellow employee's employment.

Which of the following federal workers compensation laws would apply to pay for medical expenses incurred by a seaman who is injured on a freighter when high winds and turbulent seas almost sink the ship? Jones Act Federal Employers Liability Act Sue and Labor Clause Outer Continental Shelf Lands Act

Jones Act The Jones Act provides seamen with a remedy for an injury sustained on the job without having to overcome employer defenses of assumption of risk or fellow servant liability. An employee's contributory negligence will not bar recovery, but it will reduce it.

XYZ's workers compensation policy lists the insured as "Les Smith and Hiram Jones, a partnership doing business as XYZ." This firm is a new venture for Les and Hiram, both of whom also operate other businesses. For whom does XYZ's workers compensation policy provide coverage? Les only, because he is the first named insured Les and Hiram, but only for injuries to XYZ's employees Les and Hiram, for injuries to employees of any of their ventures Les and Hiram only, but not XYZ's employees

Les and Hiram, but only for injuries to XYZ's employees Because the listed employer is a partnership, each individual partner is insured but only in his capacity as an employer of the partnership's employees.

During an interview with a newspaper reporter, Thomas, a prominent local businessman, falsely accuses a political candidate of using campaign money for personal needs. The article is published. Is Thomas covered under his commercial general liability policy when the candidate sues him for defamation? Yes, under personal and advertising liability coverage No, because personal and advertising liability coverage excludes material published with knowledge of its falsity Yes, under bodily injury liability coverage No, he must get coverage from his professional liability policy.

No, because personal and advertising liability coverage excludes material published with knowledge of its falsity

Ron bought a homeowners policy for the house he and his wife Sue own jointly. Sue noticed that only Ron's name is listed as an insured in the declarations. What should she do, if anything, to make sure she is also recognized as an insured? She must have her name added through an endorsement to the policy to obtain coverage. Nothing. The named insured's spouse is also considered a named insured in a homeowners policy. She must buy a separate homeowners policy in her name. She must qualify for coverage before she can be added to the policy.

Nothing. The named insured's spouse is also considered a named insured in a homeowners policy.

The land immediately behind Amy's home was being excavated to install underground wiring to her garage. The earth movement resulted in a gas line break and explosion that damaged her home. Which statement is true about coverage for losses due to earth movement under Amy's DP 3 form? Earth movement losses are generally covered. Earth movement losses are covered only if they result from an act of God. Only damage resulting from the explosion is covered. Damage resulting from the explosion is excluded.

Only damage resulting from the explosion is covered.

Which part of the personal auto policy (PAP) contains an insuring agreement that covers the named insured for the cost of legal representation in a lawsuit arising from an auto accident? Part A-Liability Coverage Part B-Medical Payments Coverage Part C-Uninsured/Underinsured Motorists Coverage Parts A, B, and C

Part A-Liability Coverage The Part A insuring agreement covers the cost of defending the insured from a lawsuit or claim arising from an auto accident.

Which of the following correctly describes the premium grace period of a personal auto policy? Personal auto policies do not have a premium grace period. Personal auto policies have a standard 10-day grace period that can be extended upon request by the policyowner. Personal auto policies have a standard 31-day grace period that cannot be extended. Personal auto policies have a premium grace period that varies by state.

Personal auto policies do not have a premium grace period. Although life and health insurance policies have grace periods, auto insurance policies do not. Once the insurer has billed the insured to renew the policy, the insured can either renew the policy by paying the premium or let the policy lapse by not paying the premium.

After Able Bakers sustains a $100,000 loss, the claim adjuster finds that there are two property policies, similar in terms, covering the loss. The limit of Policy A is $100,000 while the limit of Policy B is $300,000. How is the $100,000 loss allocated between these two policies? Each policy pays 50 percent, or $50,000, of the loss. Policy A pays its $100,000 limit; Policy B pays nothing. Policy A pays $75,000; Policy B pays $25,000. Policy A pays $25,000 of the loss; Policy B pays $75,000.

Policy A pays $75,000; Policy B pays $25,000. When a named insured has other insurance that applies to a loss and the other insurance is subject to the same plan, terms, conditions, and provisions, the insurer will pay its pro rata share of the covered loss or damage. The insurer's share is the proportion that the applicable limit of insurance bears to sum of the limits. Policy A pays 25 percent of the loss ($100,000/$400,000) and policy B pays 75 percent of the loss ($300,000/$400,000).

Who is responsible for collecting and remitting premium taxes to each state involved in an excess and surplus lines transaction? Insurer Producer Beneficiary Policyholder

Producer The producer is responsible for collecting premium taxes and remitting them to each state involved in an excess and surplus lines transaction.

Reba, First Bank's loan officer, abuses her discretionary authority in more than one way. Which one of her actions would First Bank's financial institution bond be most likely to cover? Reba approves a $2,000 car loan to a student with no current income. Reba falsifies documents to earn a bonus she has not actually qualified for. Reba subtracts $25,000 from her son's outstanding mortgage loan which had been higher than his home's current value. Reba approves a no-collateral loan to a financially struggling church to get favorable publicity for the bank.

Reba subtracts $25,000 from her son's outstanding mortgage loan which had been higher than his home's current value. Arbitrarily reducing the outstanding principal loan to a close relative would cause a financial loss to the bank from which Reba receives an improper financial benefit. This is the kind of loss that a financial institution bond is designed to cover.

What does the Gramm-Leach-Bliley Act do?

Requires financial institutions - companies that offer consumers financial products or services like loans, financial investment advice, or insurance - to explain their information-sharing practices to their customers and to safeguard sensitive data.

Joe's personal auto policy (PAP) has a $100 deductible for collision coverage on his sedan but no physical damage coverage on his old truck. When the truck is being repaired, Joe borrows Robin's new sports car and crashes it. Robin's collision coverage has a $1,000 deductible. Who will pay for the sports car's repairs? Robin's policy will pay all but $1,000 and Joe will pay $1,000. Robin's policy will pay all but $1,000, Joe's policy will pay $900, and Joe will pay $100. Joe's policy will pay all but $100, and Joe will pay $100. Joe has no applicable collision coverage and must pay for all repairs.

Robin's policy will pay all but $1,000, Joe's policy will pay $900, and Joe will pay $100. Because the sports car was a temporary substitute for an owned auto, Joe's policy considers it a nonowned auto, and Joe gets the broadest physical damage coverage available on any of his autos. However, because insurance follows the car, Robin's policy provides primary coverage.

Which one of the following situations would trigger coverage under a firm's computer fraud insuring agreement? Shannon hacks into a merchant's computer and redirects merchandise ordered by the merchant's customer to be shipped to her house. Using her employer's office computer, Lorena orders a TV that is shipped to her home and billed to her employer. Freddie forwards a confidential memo he receives from a client to a friend at a company that competes with the client. Kellie gives a false credit card number when completing an online application for another credit card.

Shannon hacks into a merchant's computer and redirects merchandise ordered by the merchant's customer to be shipped to her house. The computer fraud insuring agreement covers the loss of "other property" (but not confidential information) caused by the use of a computer by someone who is not an employee to fraudulently transfer covered property from inside the insured's premises.

For workers compensation purposes, when is a disability caused by a work-related injury considered to be a partial disability? The employee retains a wage earning capacity at a pay level greater than his or her maximum wage capacity at the time of the injury in work suitable to his or her qualifications and training. The employee retains a wage earning capacity at a pay level less than his or her maximum wage capacity at the time of the injury. An employee is unable to obtain employment suitable to his or her specific qualifications and training. The employee retains a wage earning capacity at a pay level less than his or her maximum wages in work suitable to his or her qualifications and training.

The employee retains a wage earning capacity at a pay level less than his or her maximum wage capacity at the time of the injury. A disability is partial if the employee retains a wage earning capacity at a pay level less than his or her maximum wages at the time of injury but is able to find work suitable to his or her qualifications and training.

Judy's husband is insured under her auto liability insurance policy and was involved in an incident that resulted in his operator's license being suspended during the policy period. What is the effect when that suspension becomes final? There is no effect when the suspension becomes final. The insurer could cancel the policy, but only if the suspended operator's license belongs to the owner of the insured auto. The insurer has grounds for canceling the policy. The insurer does not have grounds for canceling the policy.

The insurer has grounds for canceling the policy. If the named insured or any other operator, either a resident of the same household or someone who customarily operates an automobile insured under the policy, has had his or her operator's license suspended during the policy period and the revocation or suspension has become final, the insurer can cancel the policy.

Manuel has a DP 1 basic form dwelling policy on his residence. During a storm, the residence is struck by lightning, causing damage to the dwelling and personal property within it. Which statement is correct about the policy's coverage in this situation? The loss is adjusted on an actual cash value basis for both the dwelling and the personal property. No coverage is provided under DP 1. The loss is adjusted on a replacement cost basis for the dwelling and actual cash value basis for the personal property. The loss is adjusted on a replacement cost basis for both the dwelling and the personal property.

The loss is adjusted on an actual cash value basis for both the dwelling and the personal property.

Tina borrows a neighbor's car to run a personal errand. She collides with another car and injures the other driver. The injured driver files a liability claim against Tina and the neighbor. Whose policy will handle the claim? Both policies will respond on a pro rata basis. Since Tina was at fault, only her policy will respond. The neighbor's policy will be primary; Tina's policy will be excess. Tina's policy will be primary; the neighbor's policy will be excess.

The neighbor's policy will be primary; Tina's policy will be excess.

Mr. Uhlman's dwelling policy is written on a DP 1. He wants to add the peril of windstorm to the basic perils of fire, lightning, and internal explosion. What instructions do you give him with respect to processing his request? The peril of windstorm is not available on the DP 1. The peril of windstorm must be purchased with the peril of vandalism. The peril of windstorm can be purchased with extended coverages (EC). The peril of windstorm can only be added at renewal.

The peril of windstorm can be purchased with extended coverages (EC).

T/F: With respect to property and casualty insurance, an insurable interest must exist at the time of the loss in order for the insurer to pay the claim.

True

Jonas has a restaurant in a small resort town. He operates the restaurant by himself with his wife's assistance. During the peak season, he hires an extra cook and a waitress. These employees work full-time for at least 16 weeks each year. Are they eligible for workers compensation benefits if injured at work? The employer will make this determination. Yes, these employees are regularly employed for workers compensation purposes. No, because they are not full-time employees throughout the year. No, because they are not full-time employees for at least 6 months out of the year.

Yes, these employees are regularly employed for workers compensation purposes. If a private employer, other than an agricultural employer, regularly employs less than three employees, workers compensation laws apply if at least one employee has been regularly employed by that same employer for 35 or more hours per week for 13 weeks or longer during the preceding 52 weeks.

As a railroad conductor, Lucas works in several different states during the course of a typical workday. His employee can obtain coverage under a standard workers compensation policy that has what kind of endorsement? a Jones Act endorsement a Longshore and Harbor Workers' Compensation Act endorsement a Federal Employers Liability Act endorsement an Outer Continental Shelf Lands Act endorsement

a Federal Employers Liability Act endorsement Employers can provide benefits to interstate railroad employees by adding the Federal Employers Liability Act coverage endorsement to a standard workers compensation policy.

Roger saw an advertisment in a local newspaper stating the Jennings Insurance Agency would provide a free brochure on mortality and demographic data to anyone who requested one in writing. They failed to disclose that an agent would then call upon Roger. This practice is; -a deceptive marketing practice that is prohibited -an unfair practice, but one that is tolerated -a fairly routine and accepted marketing practice -not addressed in the insurance regulations

a deceptive marketing practice that is prohibited It is an unfair method of competition and an unfair act or practice to use marketing methods that fail to disclose the purpose of the marketing is so to solicit insurance and that an agent or insurer will contact the individual

When holding insurance premiums and other funds, agents must perform their duties in what role? -a fiduciary capacity -a trustor capacity -an agency capacity -trustee relationship

a fiduciary capacity

Which of the following items owned by the insured would NOT be covered under a HO-3 Special Form homeowners policy? a family cemetery plot a greenhouse that is rented to a local farm for business purposes vacant land on the insured property land on which a residence is being built for the insured

a greenhouse that is rented to a local farm for business purposes

Although the liability section of the homeowners policy excludes motor vehicle liability, some exceptions do permit coverage for the use of certain motor vehicles. Which of the following types of vehicles will be covered in the event they cause a liability claim? a motorized wheelchair used by the insured's spouse at the insured residence an automobile that is registered for use on public roads a van used to carry cargo for a fee a race car that is used exclusively on race tracks

a motorized wheelchair used by the insured's spouse at the insured residence

Public officials in the village of Castle Heights are covered under the same public officials bond, and each of the bonded officials is identified by name within the bond. What kind of bond is Castle Heights' public official bond? a name schedule bond an individual bond a position schedule bond a blanket bond

a name schedule bond Name schedule bonds are written on employees or officials named in a list or "schedule."

Greg's business is covered by an open perils property insurance policy, but he is concerned that the policy excludes coverage for flood and earthquake losses. What might Greg purchase to obtain flood and earthquake coverage? -a supplemental perils policy -a special perils policy -a concurrent causation endorsement -a difference-in-conditions policy

a special perils policy

Which of the following incidents would be covered by the equipment insurance breakdown policy? a surge in electricity damages a company's mainframe computer a boiler's tubes are pitted with scale and must be replaced. worn-out bearings cause a machine to stop functioning basement flooding causes a company's heating system to malfunction

a surge in electricity damages a company's mainframe computer A covered breakdown includes a failure in pressure or vacuum equipment or a mechanical or electrical failure (including surges). Coverage is excluded for portions of equipment normally subject to periodic replacement, routine maintenance, or general wear-and-tear.

To place insurance with a nonadmitted insurer, an agent must obtain rejections from three admitted insurers and file with the stamping office a document showing those rejections. What is this documentation called? stamp white list export license affidavit

affidavit Except for coverages listed in a state's surplus lines exportable list, the agent must file an affidavit with the stamping office in many states showing that a diligent search was performed in trying to place the business in the admitted insurer market.

Before workers compensation statutes were enacted, employers could defend themselves against negligence claims by injured workers by employing certain common-law defenses. Which is NOT one of those defenses? contributory negligence negligence of a fellow employee act of God assumption of risk

act of God The common-law defenses available to employers were assumption of risk, contributory negligence, and negligence of a fellow employee.

Dwelling policy form DP 1 Basic Form covers the dwelling on what valuation basis? depreciated cost basis replacement cost basis actual cash value basis scheduled amount basis

actual cash value basis

If sub-contractor ABC signs a contract with general contractor DEF in which it agrees to hold DEF harmless for any injuries to ABC's employees, how should ABC modify its workers compensation policy to ensure it has proper liability coverage? add the Waiver of Our Right to Recover from Others Endorsement (WC 00 03 13) delete the subrogation condition add the Voluntary Compensation and Employers Liability Coverage Endorsement (WC 00 03 11 A) add DEF as an additional insured

add the Waiver of Our Right to Recover from Others Endorsement (WC 00 03 13) The Waiver of Our Right to Recover from Others Endorsement can be used to waive the insurer's right of subrogation against third parties named in the endorsement schedule.

When his sports car was returned from the body shop following repairs for collision damage, Guillermo was dismayed to learn that the shop installed parts that were not made by the car's manufacturer. This is because the insurer authorized the shop to use: OEM parts aftermarket parts domestic parts inferior parts

aftermarket parts Parts not manufactured by the original equipment manufacturer are known as aftermarket parts or non-OEM parts.

Coverage under the Insurance Services Office, Inc. (ISO) pollution liability forms is written subject to which two policy limits? "each occurrence" limit and "each location" limit aggregate limit and "each pollution incident" limit aggregate limit and "each location" limit per claim limit and per occurrence limit

aggregate limit and "each pollution incident" limit The aggregate limit is the total amount payable for all bodily injury and property damage losses during the policy year. The "each pollution incident" limit applies to all bodily injury and property damage losses arising from a single pollution incident.

A contract that potentially provides one party considerably more than the other party may receive from it is called a(n): conditional contract aleatory contract contract of adhesion unilateral contract

aleatory contract

Jane's insurance policy contains a stated amount valuation provision. This provision states that she will receive the lowest of three amounts if her covered property is stolen or destroyed. Which of the following is NOT one of those three amounts? the property's actual cash value at the time of the loss an amount agreed upon by the insurer and Jane the cost to repair or replace the property with similar property the dollar amount of insurance specified in the policy schedule

an amount agreed upon by the insurer and Jane

The Extended Non-Owned Coverage: Vehicles Furnished or Available for Regular Use-Michigan (PP 03 53 09 06) endorsement allows extended non-owned vehicle coverage for only one individual named in the Schedule only one individual named in the Declarations an individual named in either the Schedule or Declarations, including the individual's spouse an individual named in the Schedule or Declarations, including a spouse and specified family members

an individual named in the Schedule or Declarations, including a spouse and specified family members PP 03 53 09 06 allows for extended non-owned vehicle coverage only for the individual named in the Schedule or in the Declarations. This may be one named individual or a named individual and any specified family member, including a spouse.

The Extended Non-Owned Coverage: Vehicles Furnished or Available for Regular Use-Michigan (PP 03 53 09 06) endorsement allows extended non-owned vehicle coverage for an individual named in either the Schedule or Declarations, including the individual's spouse only one individual named in the Schedule an individual named in the Schedule or Declarations, including a spouse and specified family members only one individual named in the Declarations

an individual named in the Schedule or Declarations, including a spouse and specified family members PP 03 53 09 06 allows for extended non-owned vehicle coverage only for the individuals named in the Schedule or in the Declarations. This may be one named individual or a named individual and any specified family member, including a spouse.

The personal auto policy (PAP) defines many terms used in the policy, such as "your covered auto." Which of the following autos is NOT included in the meaning of that term? vehicles shown in the declarations newly acquired autos borrowed autos temporary substitute autos

borrowed autos "Your covered auto" is an essential term in the PAP. There are four types of covered autos: vehicles shown in the declarations, newly acquired autos, owned trailers, and temporary substitute autos.

Judy owns a small beauty salon located on the first floor of her apartment building. A customer trips over a hair dryer cord in the salon and is injured. Judy is held legally liable for the customer's injury. What coverage under her businessowners policy (BOP) will pay for this customer's injury claim? supplementary payments coverage medical expenses coverage commercial general liability coverage business liability coverage

business liability coverage

Al's farm does not produce enough income to support his family, so he supplements his farming income by working as a carpenter. Which exclusion in Al's farm liability coverage form precludes coverage for any loss resulting from his carpentry activities? personal injury employers liability business pursuits custom farming

business pursuits No coverage applies to losses arising out of non-farming business pursuits engaged in by the insured.

Which penalty can the Michigan Insurance Director impose if a person acts as an agent without a license? -up to three months in prison -restitution to injured parties -fine of up to $1,000 -cease and desist order

cease and desist order

Randy goes to Main Street Insurance Company to buy a homeowners policy. He observes that he cannot negotiate the terms with the insurer, which presented the policy to him on a take-it-or-leave-it basis. This type of contract is considered a(n): conditional contract aleatory contract contract of adhesion unilateral contract

contract of adhesion

Leona rents a storefront space. She signs a lease in which she assumes responsibility for liability to anyone injured in her store, even if the injury is the landlord's fault. What kind of general liability exposure is she assuming under this lease? contractual liability products and completed operations liability premises and operations liability independent contractor liability

contractual liability Contractual liability results from the voluntary assumption of obligations that otherwise would not exist under common law. Through this lease agreement, Leona voluntarily assumes responsibility for the landlord's liability.

Which is NOT a typical part of a complete personal auto policy? endorsements personal auto coverage form declarations page coverage audit

coverage audit The typical parts of a PAP include the declarations page, the personal auto coverage form, and any applicable endorsements.

Colin hires Sal, a retired farmer, to help him with the harvest. Sal is seriously injured when he falls off the tractor he was operating in Colin's field. Colin's farm liability coverage form: does not cover Sal's injuries because Sal assumed the risk when he operated the tractor covers Sal's injuries regardless of the existence of other insurance like workers compensation disability benefits does not cover Sal's injuries under any circumstances covers Sal's injuries as long as the loss is not subject to the state's workers compensation laws

covers Sal's injuries as long as the loss is not subject to the state's workers compensation laws The workers compensation exclusion precludes coverage if state law requires Colin to provide Sal with workers compensation benefits, which is usually done by purchasing workers compensation insurance.

An endorsement in the form of special provisions is used to modify a dwelling policy to reflect premium increases current state law changes of address of the insurer and/or insured intent of an insurer to cancel a policy

current state law Coverage of a dwelling policy may be changed through the use of an endorsement added to the policy. Endorsements may also be in the form of special provisions that modify the policy to reflect current state law.

If the Davis brothers are farming for others at a farm that is NOT an insured location, and the farming operations are directed by the owner of the outside farm, they are engaged in: agricultural enterprises custom farming controlled business professional services

custom farming "Custom farming" is the performance of specific planting, cultivating, harvesting, or related farming operations by an insured at a farm that is not an "insured location," when the performance is under the direction of the owner or operator of the outside farm. Custom farming is excluded from coverage, though coverage can be added by endorsement.

As an accounts receivable clerk, Teresa often receives checks through the office mail. Last month, she took one of the larger checks that was payable to her employer, endorsed it by printing her employer's name, and deposited the check into her own account. The forgery or alteration coverage in the employer's crime policy: covers the party that drafted the check but not Teresa's employer does not cover this forgery claim because it was committed by an employee does not cover the claim because printing the employer's name does not constitute a forgery covers this forgery claim because it was committed by an employee

does not cover this forgery claim because it was committed by an employee Her printing of the employer's name constitutes a forgery, and is not covered because she is an employee. Acts of employees is a common exclusion in all crime coverages except employee theft. If the employer has employee theft coverage, it would possibly cover this claim.

The DP 2 Broad form of the dwelling policy covers all the following perils EXCEPT: burglary damage falling objects artificially generated electrical current earth movement

earth movement

Jackson Hardware has a basic property policy. Which of the following perils is NOT typically covered under such a policy? riot earthquake smoke sprinkler leakage

earthquake Loss by earthquake is typically excluded in basic, if not most, property policies.

The federal Motor Carrier Act (MCA) of 1980 requires certain motor vehicles to carry minimum limits of insurance for public liability and: personal and advertising injury claims medical claims workers compensation claims environmental restoration claims

environmental restoration claims The federal Motor Carrier Act (MCA) of 1980 requires certain motor vehicles to carry minimum limits of insurance for public liability and environmental restoration claims. Environmental restoration involves restitution for loss, damage, or destruction of natural resources (and cleanup costs) resulting from a covered pollution incident while the motor carrier transports a pollutant.

While the liability section of a businessowners policy (BOP) generally does not cover liability that the insured assumes through a contract, coverage is provided for insured contracts, which include al the following EXCEPT: elevator maintenance agreement equipment rental agreement premises lease with the insured business's landlord an easement

equipment rental agreement

Sandy requires her employees to use their personal autos when calling on customers. If she adds the Employees as Insureds endorsement to her company's business auto policy (BAP), employees who use their personal cars for business calls will have: primary coverage under the BAP no need to maintain their own personal auto policies comprehensive coverage under the BAP excess coverage under the BAP for losses that exceed their personal auto liability limits

excess coverage under the BAP for losses that exceed their personal auto liability limits The endorsed BAP will provide excess coverage over the employee's personal auto policy if an employee is liable for a loss involving the business use of his or her personal vehicle

Which of the following is a covered peril under the farm policy's Farm Livestock Coverage (FP 00 40) form? neglect landslide failure of utility services explosion

explosion Of those listed, only explosion (e.g., furnace, alcohol stills, steam boilers, and water pipes) is a covered peril.

The dwelling policy DP 3 Special Form excludes coverage for loss due to water damage by all the following means EXCEPT: fire that results from water damage flood sewer backup underground seepage

fire that results from water damage

When reading his livestock coverage form, Tad discovers that it excludes coverage for some perils he thought would be covered and covers some perils he thought would be excluded. For instance, he finds that the policy covers loss to covered livestock caused by: neglect intentional loss flood earth movement

flood Flood is among the named perils that Tad's form covers. Earth movement, intentional loss, and neglect, on the other hand, are specifically excluded.

Enrique and Troy live in a fraternity house. Because they often share their cars, they each have keys to the other's car. Troy has a personal auto policy (PAP), but Enrique is uninsured. Troy has an accident while driving Enrique's car. For whom will Troy's PAP provide liability coverage? for neither Troy nor Enrique for Enrique but not for Troy for both Troy and Enrique for Troy but not for Enrique

for Troy but not for Enrique Troy's PAP will protect him because he was driving a nonowned vehicle with the owner's permission.

Morgan Transportation is in the business of transporting cargo by truck. It enters into contracts with other businesses to move their cargo. Which of the following terms most accurately describes Morgan Transportation? private carrier for-hire carrier trucker commercial motor vehicle

for-hire carrier A "for hire" carrier is a company that provides truck transportation of cargo belonging to others and is paid for doing so. A private carrier is a company that provides truck transportation of its own cargo. There are different types of motor carriers or trucking companies: private, "for hire," or a combination of both.

What is the major cause of loss, or peril, on a crop insurance policy? fire wind hail lightning

hail Crop insurance typically covers losses that occur from the single peril of hail.

When a Michigan homeowners insurance policy is revised through addition of an endorsement that results in termination of the initial policy, the effective date and time of coverage of the new coverage is when the insured is notified by the insurer that the endorsement is to be added immediately upon termination of the replaced coverage 24 hours following termination of the replaced coverage upon the written acceptance by the insured of the new coverage

immediately upon termination of the replaced coverage If coverage under an existing policy will terminate through addition of an endorsement, the effective date and time for the replacing policy begins immediately upon termination of the replaced coverage.

With respect to workers compensation insurance, what term is used to describe a worker's reduction in his or her ability to perform work, either temporarily or permanently? rehabilitation disability impairment injury

impairment An impairment is a reduction in an employee's ability to perform work--either permanently or temporarily.

What do Dram Shop laws accomplish? imposition of liability on those selling liquor imposition of liability on car dealers imposition of liability on grocers imposition of liability on those selling beverages

imposition of liability on those selling liquor

An insurance company's loss ratio is determined by dividing the insurer's: incurred losses by its underwriting expenses unearned premiums by its underwriting expenses combined ratio by its expense ratio incurred losses by its earned premiums

incurred losses by its earned premiums An insurer's loss ratio, expressed as a percentage, compares the insurer's incurred losses with its earned premiums.

Robbery

is a theft during which force is used or threatened

Upon learning that Bryant, a key executive, has been kidnapped, Bryant's employer contacted the security firm listed in the declarations of its kidnap/ransom and extortion policy. The security firm was able to negotiate Bryant's release and billed his employer $250,000 for its services. Which coverage of the employer's kidnap/ransom and extortion policy will reimburse the employer for its $250,000 loss? in-transit delivery of property detention or hijack kidnap/ransom and extortion-direct loss kidnap/ransom and extortion-expenses incurred

kidnap/ransom and extortion-expenses incurred The expenses incurred insuring agreement pays for the costs and fees of the security firm shown in the declarations that is hired to obtain the release of a kidnapped insured person.

The Special Provisions-Michigan (DP 01 21 04 12) endorsement states that an insurer will not cover under a dwelling policy a property loss caused by fire if the insured has done any of the following EXCEPT: made false statements relating to the insurance engaged in fraudulent conduct intentionally concealed a material fact knowingly misrepresented a relatively insignificant circumstance

knowingly misrepresented a relatively insignificant circumstance If loss is caused by fire, the insurer will not cover a loss if the insured has intentionally concealed or misrepresented a material fact or circumstance; engaged in fraudulent conduct; or made false statements relating to the insurance.

The Special Provisions-Michigan (HO 01 21 05 11) endorsement will cover a property loss caused by fire if the insured has intentionally concealed a material fact knowingly misrepresented a relatively insignificant circumstance engaged in fraudulent conduct made false statements relating to the insurance

knowingly misrepresented a relatively insignificant circumstance

The Special Provisions-Michigan (DP 01 21 04 12) endorsement states that an insurer will not cover under a dwelling policy a property loss caused by fire if the insured has done any of the following EXCEPT: knowingly misrepresented a relatively insignificant circumstance intentionally concealed a material fact engaged in fraudulent conduct made false statements relating to the insurance

knowingly misrepresented a relatively insignificant circumstance If loss is caused by fire, the insurer will not cover a loss if the insured has intentionally concealed or misrepresented a material fact or circumstance; engaged in fraudulent conduct; or made false statements relating to the insurance.

The additional BOP coverage for loss from fungi, wet or dry rot, or bacteria that results from one of the specified causes of loss, applies to all of the following EXCEPT: direct physical loss loss from fungi resulting from fire and lightning cost of tearing out and replacing property to gain access to the fungi, wet or dry rot, or bacteria cost of testing performed after restoration of the damaged property, if there is a reason to believe that fungi, wet or dry rot, or bacteria are present

loss from fungi resulting from fire and lightning

An insurer's profitability is determined by its combined ratio, which is equal to the insurer's: incurred losses minus premium reserves expense ratio minus net reserves incurred expenses plus written premium loss ratio plus expense ratio

loss ratio plus expense ratio An insurer's profitability is determined by its combined ratio (also known as the combined loss and expense ratio), which is the sum of its loss ratio and expense ratio.

Salvador, a carpenter, is a contractor for Coogan Construction Company, which builds houses. After Salvador completes a large framing job, Coogan has financial problems and cannot pay him. Through which of the following might Salvador recover some payment for his labor? mechanics lien license and permit bond performance bond fiduciary bond

mechanics lien Mechanics liens are legal claims placed on property by suppliers and contractors who supply materials or provide labor related to the property. Unlike most products, materials and labor that are incorporated into a construction project cannot be reclaimed by those who supplied the materials or labor. Mechanics liens guarantee the contractor payment for work completed.

Which is NOT a bodily injury for purposes of coverage by the business auto policy (BAP)? death illness disease mental trauma

mental trauma For liability coverage to apply under the BAP, the insured's legal liability for damages must arise from bodily injury caused by an accident. The policy defines bodily injury as illness, sickness, or disease. Bodily injury also includes death resulting from these. The injury must involve actual injury to or sickness of the body. Mental trauma is not within the meaning of bodily injury.

In four states (North Dakota, Ohio, Washington, and Wyoming), workers compensation insurance is available only from: competitive state funds organizations monopolistic state funds private insurers group self-insurance plans

monopolistic state funds In these four states, employers must purchase workers compensation coverage through a monopolistic state workers compensation fund.

Darrel's car is insured by a personal auto policy that includes liability, collision, and other-than-collision coverages. He buys a pickup truck with a 12,000-pound gross vehicle weight. The PAP will provide: automatic liability coverage on the pickup if he reports it to the insurer within 14 days automatic liability coverage on the pickup for the remainder of the policy period no automatic coverage for the pickup because of its high weight rating automatic collision coverage on the pickup if he reports it to the insurer within four days

no automatic coverage for the pickup because of its high weight rating The PAP does not provide automatic coverage for trucks with a gross vehicle weight of 10,000 pounds or more.

What is the statute of limitations in the Michigan Personal Injury Protection (CA 22 20 03 11) endorsement for an insured to bring legal action against an insurer? two years from the date of the accident causing the injury one year from the date of the accident causing the injury one year from the date of notification of the accident causing the injury two years from the date of notification of the accident causing the injury

one year from the date of the accident causing the injury CA 22 20 03 11 states that a legal action may not be brought against the insurer after one year from the date of the accident causing the injury unless the insurer received written notice of the injury within one year from the date of the accident, or already paid personal injury benefits for the injury.

Surety bonds, once written, are generally: cancellable noncancellable renewable nonrenewable

noncancellable Surety bonds, once written, are generally noncancellable. For the obligee to have confidence in the protection provided by the bond, it needs to know that the surety cannot back out of the bond contract if the contractor's financial condition worsens.

In an attempt to reduce her expenses, Mattie sells her car. What must she do to cancel her auto insurance policy? nothing, because coverage automatically ended when she sold the car forfeit the unearned premium pay a cancellation fee notify the insurer in writing of her intent to cancel the policy

notify the insurer in writing of her intent to cancel the policy The named insured can cancel by giving the insurer advance written notice of the intent to cancel the policy.

Through a fidelity bond issued by Omega Assurance, Olga is guaranteed that her employee, Dee, will not be dishonest. In this transaction, Olga is the: obligor. surety obligee principal

obligee The obligee is the party, usually the employer, to whom the surety (Buford) makes the guarantee.

The Amendment of Policy Provisions-Michigan (PP 01 80 01 13) endorsement adds replacement language on liability coverage that states that the insurer will do all of the following EXCEPT: pay damages for bodily injury for which the insured becomes legally responsible because of an auto accident pay damages for property damage even if it is not certain that the insured is legally responsible for the auto accident settle or defend claims or suits for damages pay all defense costs above its limit of liability for the coverage

pay damages for property damage even if it is not certain that the insured is legally responsible for the auto accident The insurer will pay damages for bodily injury or property damage only if the insured is legally responsible because of an auto accident.

In states with a no-fault law, what coverage may replace the personal auto policy's medical payments coverage? personal and advertising injury (PAI) coverage bodily injury coverage personal injury protection (PIP) coverage personal injury coverage

personal injury protection (PIP) coverage Medical payments coverage is optional in most states, and it may be replaced by personal injury protection (PIP) coverage in states with a no-fault law.

The personal auto policy's coverage for collision and other-than-collision risks are collectively called: comprehensive coverage third-party coverage physical damage coverage property damage coverage

physical damage coverage Insurance practitioners collectively refer to collision and other-than-collision (comprehensive) coverages as physical damage coverage.

All of the following are purposes of exclusions in property and liability insurance policies EXCEPT: eliminate or reduce overlapping coverage remove coverage that is not needed by a typical insured provide an incentive to prevent losses provide coverage for otherwise uninsurable risks

provide coverage for otherwise uninsurable risks

To increase her sales at the end of the year, Trudy starts offering potential clients a $250 cash gift card in exchange for buying an insurance policy. Which prohibited sales practice is Trudy committing?

rebating

The DP 3 Special Form dwelling policy covers the dwelling on what valuation basis? depreciated cost basis replacement cost basis actual cash value basis scheduled amount basis

replacement cost basis

With the dwelling policy, the DP 2 Broad Form covers the dwelling on what valuation basis? actual cash value basis replacement cost basis agreed value basis depreciated value basis

replacement cost basis The DP 2 covers the dwelling and other structures on a replacement cost basis. However, it covers personal property (and awnings, carpeting, household appliances, outdoor equipment and antennas, and nonbuilding structures) on an actual cash value basis.

A form of workers compensation premium calculation that bases the final premium on losses the insured business incurs during the current policy term is called: experience rating dividend rating merit rating retrospective rating

retrospective rating Retrospective rating employs a complex formula for factoring an insured's current loss experience into the final premium.

All of the following describe the types of risks placed in the excess and surplus lines insurance market EXCEPT: risks that are substandard due to adverse loss experience risks that are insurable for less premium in other states risks that have a low demand in the state risks that require higher coverage limits than admitted companies can cover

risks that are insurable for less premium in other states Risks placed in E&S lines markets are typically substandard due to adverse loss experience, or unusual (meaning there is a low demand for the product in the state), or unable to be placed in conventional markets due to a shortage of capacity.

A workers compensation insurance policy with a Longshore and Harbor Workers' Compensation Act Coverage endorsement excludes coverage for workers subject to all the following legislation EXCEPT: the Defense Base Act the Longshore and Harbor Workers' Compensation Act the Outer Continental Shelf Lands Act the Jones Act

the Longshore and Harbor Workers' Compensation Act The endorsement provides workers compensation and employers liability coverage for workers subject to the Longshore and Harbor Workers' Compensation Act and specifically excludes coverage for other Acts that can be addressed with other endorsements.

Unless a direct coverage option applies, garagekeepers coverage protects the insured when: the insured is legally liable for the loss to the owner's vehicle the loss to the owner's vehicle is caused by an act of God the loss occurs to any vehicle in the insured's care, custody, or control the owner of the vehicle that sustains a loss is uninsured

the insured is legally liable for the loss to the owner's vehicle Unless the garagekeepers coverage shows that a direct coverage option applies, claims will be paid only for losses caused by the insured's negligence.

Edie's Emporium lost electricity for two weeks because the power plant exploded. Which of the following claims was paid under the Utility Services - Direct Damage endorsement on Edie's Emporium's BOP? the income lost during the two weeks power was out the extra expenses related to storage of some of the insured's perishable items the loss to some of the insured's perishable items the inconvenience Edie's Emporium suffered from the power outage

the loss to some of the insured's perishable items

What is public or livery conveyance exclusions?

the transporting of people and/or goods for hire, such as by a taxi service, motor carrier, or a delivery service. This coverage is excluded under the personal auto policy (PAP).

In a dwelling policy, the provision that addresses how the value of a property loss is determined is found in: an endorsement the declarations the policy conditions provision the valuation provision

the valuation provision

All of the following are covered perils under an unendorsed DP 2 Broad Form dwelling policy EXCEPT: burglary damage freezing of a household appliance weight of ice, snow, or sleet theft

theft

All of the following perils are covered on an unendorsed DP 2 Broad Form dwelling policy EXCEPT: falling objects weight of ice, snow, or sleet burglary damage theft

theft

Which of the following would be covered under the property section of an unendorsed businessowners policy (BOP)? theft of furs loss of watercraft while afloat theft of valuable papers loss of electronic data

theft of furs

Which of the following correctly describes the coverage provided by the broad theft coverage (DP 04 72) endorsement to a dwelling policy? theft, attempted theft, vandalism, and property damage that results from a theft attempted theft and theft only theft and property damage caused by burglars to gain access only property damage resulting from theft or an attempted theft only

theft, attempted theft, vandalism, and property damage that results from a theft

How many sections does the ISO businessowners policy (BOP) contain? two three four five

three

Maryann's car is being towed from its parking space on the street in front of her home. The other-than-collision coverage of her personal auto policy will cover her loss if the: car was being repossessed by the lender that financed its purchase police had a warrant to seize the car as evidence in a criminal investigation car was being towed because it was parked illegally tow truck operator was unlawfully removing the car

tow truck operator was unlawfully removing the car Theft is a covered cause of loss, but confiscation by a government authority is specifically excluded from coverage.

Burglary

traditionally defined as the theft of property from within a premises by a person who forcibly enters the premises with the intent to commit a crime.

When defending against a plaintiff's liability suit, all the following are common defenses to negligence EXCEPT: unintentional negligence assumption of risk contributory negligence comparative negligence

unintentional negligence There are a several ways a person can defend against a negligence suit, including the plaintiff's assumption of risk, contributory negligence, and comparative negligence.

When a Michigan homeowners insurance policy is revised through addition of an endorsement that results in termination of the initial policy, the effective date and time of coverage of the new coverage is when the insured is notified by the insurer that the endorsement is to be added upon the written acceptance by the insured of the new coverage 24 hours following termination of the replaced coverage immediately upon termination of the replaced coverage

upon the written acceptance by the insured of the new coverage If coverage under an existing policy will terminate through addition of an endorsement, the effective date and time for the replacing policy begins immediately upon termination of the replaced coverage.

Brad's home is badly damaged by flood. Which of the following items is covered under the personal property coverage (Coverage B) of his NFIP dwelling form? his property fence window air conditioner his home's septic system money and stamps

window air conditioner Personal property (Coverage B) covers property owned by the named insured or household family members and applies only to personal property that is inside the fully enclosed building described in the application except paper items and money.

With the business auto policy (BAP), symbol 7 (specifically described autos) covers newly acquired autos only if the insured informs the insurer of the new auto: within 30 days after acquiring it before the end of the current policy period at least seven days after acquiring it anytime between 10 and 21 days after acquiring it

within 30 days after acquiring it When symbol 7 is used for a particular coverage, the insured must inform the insurer within 30 days after acquiring the new auto that coverage is desired on it.

Which of the following is a a peril? -ice -snow -flood -rain

-flood

Octavio's home and personal property are insured by a DP 3 policy. Which loss would this policy cover? A ceiling is damaged by water when an upstairs toilet overflows. A sewer backup floods the basement. Water below the ground's surface seeps into the basement and ruins a recreational room. Wind-driven spray from flood waters damages the home's siding.

A ceiling is damaged by water when an upstairs toilet overflows. The water damage exclusion does not exclude coverage for loss caused by a defective toilet.

A homeowner who owns a vicious dog may be more inclined to purchase liability insurance than one who doesn't own such animal. This is an example of? A. a speculative risk B. Risk avoidance C. an indirect loss D. adverse selection

Adverse selection

Which of the following types of agent authority arises from the impression that the public has about the agent and his or her duty to the principal? A. Actual B. Express C. Implied D. Apparent

Apparent

An insurance producers is required to act in whose best interest? A. Producer's office staff B. National Association of Insurance Companies C. Insurance commissioner D. Applicant or insured

Applicant or Insured

A chandelier falls into the crowd attending the bridal shower at Astrid and Tony's house. The medical payments to others coverage of Astrid and Tony's homeowners policy will pay for whose medical bills? Astrid's Astrid and Tony's pet dog, Silas Bridget's, the honored guest at the party Elvin's, the electrician who installed the chandelier

Bridget's, the honored guest at the party Coverage applies to persons injured on the insured location who are there with the insured's permission, but not to the named insured, regular residents of the household, or pets. Even though the electrician may be held responsible for the accident, he is not covered by the homeowner's policy.

Joe was restocking the merchandise in the Discount store at 1 a.m. when an alarm went off. He rushed to the back room and discovered that the normally locked exit door was broken open, and a carton of valuable merchandise was missing. This is an example of:

Burglary

RST insurance company sells auto insurance only through the internet. what type of marketing system does RST use? A. Insurance brokers B. Direct response marketing C. the exclusive agency system D. The independent agency system

Direct response marketing

Excalibur Insurance Company sends periodic privacy notices to all customers to comply with which of the following federal laws? Federal Trade Commission (FTC) Act Health Insurance Portability and Accountability Act (HIPAA) Fair Credit Reporting Act (FCRA) Gramm-Leach-Bliley (GLB) Act

Gramm-Leach-Bliley (GLB) Act GLB requires financial institutions to provide customers with a privacy notice at the start of a customer relationship and annually thereafter.

Which of the following is not among the recognized approaches to handling risk? A. Ignoring it B. Avoiding it C. Sharing it D. Transferring it

Ignoring it

A producer who obtains the personal health information about a customer must: -inform the customer about the producer's privacy policy and practices -immediately dispose of it -return it to the customer as soon as possible -Report it to the insurer within a reasonable time

Inform the customer about the producer's privacy policy and practices

Which statement regarding the regulation of the insurance industry in the U.S. is correct? A. It is highly regulated, mostly at the state level. B. It is highly regulated equally by the states and federal government C. It is a nonregulated industry D. It is highly regulated, mostly at the federal level.

It is highly regulated, mostly at the state level.

Harriet's dental office sustained serious water damage when a pipe broke sometime over the weekend. Which one of the following is NOT a duty required of Harriet by her property insurance policy? Provide prompt notice of the claim to the insurer or its agent. Provide a sworn proof of loss if the insurer requests it. Cooperate with the insurer in the investigation. Notify the police.

Notify the police. Harriet is required to notify the police only if a crime has been committed. Unless evidence suggests that somebody caused the pipe to break, the loss involves no crime, and there is no need to notify the police.

While backing out of her garage, Louise accidentally lowers her garage door. The door strikes her car and is damaged. She learns that her homeowners insurance policy excludes liability coverage for damage to the insured's own property. Where might she find coverage? a condition in Section II of the policy Section I of the policy an exception to the "damaged to owned property" exclusion an extension of coverage in Section II of the policy

Section I of the policy The homeowners insurance policy provides no liability coverage for property damage to property owned by an insured because first-party property coverage is covered by Section I of the policy.

Cory purchased his home with a 10 percent down payment and a 90 percent mortgage from Sidney Bank. Why does Sidney Bank have an insurable interest in Cory's house? -Cory cannot afford to make mortgage payments on his own. -The mortgage holder (the bank) is responsible for paying insurance premiums on the mortgaged house. -The bank faces the possibility of a loss if Cory's house is damaged or destroyed. -The mortgage documents Cory signed make the bank a coinsured.

The bank faces the possibility of a loss if Cory's house is damaged or destroyed.

Keri's business is protected by an unendorsed businessowners policy. A computer system controls access to the premises. The control system malfunctions, and burglars enter the building. How does the BOP respond? The utility services exclusion precludes coverage. The computers and data exclusion precludes coverage. The power surges exclusion precludes coverage. The loss is covered by the computers and data coverage extension.

The computers and data exclusion precludes coverage. If electronic locks fail to prevent burglars from entering the premises, the loss from theft is not covered due to the computers and data exclusion. Theft is not a specified cause of loss in the BOP.

An employee accidentally damaged a sprinkler head that is part of Jumbo Store's automatic sprinkler system. The manager shuts off the system's main valve and notifies the sprinkler company, which schedules the repair for that evening. Shortly before the store closes that night, a fire breaks out in the storeroom. How will the protective safeguards endorsement to Jumbo's businessowners policy respond to the claim for fire damage? The policy will cover only the direct loss from the fire. The loss is not covered because Jumbo did not notify the insurer of the shutdown. The policy will cover the loss because the protective system was shut off for less than 48 hours. The loss is not covered because the manager shut off the protective system.

The policy will cover the loss because the protective system was shut off for less than 48 hours. The protective safeguards endorsement permits an exception to the notice requirement when the safeguard is impaired for less than 48 hours.

Which are typically NOT among the provisions of a typical property and casualty insurance policy? Insuring Agreements Waivers Conditions Declarations

Waivers Standard policy provisions include declarations, definitions, insuring agreement(s), exclusions, and conditions.

Insurance can only work when the parties to the contract are completely honest with one another. That's why insurance contracts are considered to be what type of contract? Utmost good faith Adhesion indemnity Concealment

Utmost good faith

When is an owner of a property or casualty insurance policy required to have an insurable interest in the insured risk?

When the policy is purchased With respect to property and casualty insurance, an insurable interest must exist at the time of the loss in order for the insurer to pay the claim.

For a building that has wooden siding, which of the following losses would be excluded by one of the maintenance or wear-and-tear exclusions in a property insurance policy? Pieces of the building's siding blow off in a windstorm. Heat from a fire in the building next door scorches the building's siding. A hailstorm creates pockmarks in the building's siding. Woodpeckers make holes in the building's siding.

Woodpeckers make holes in the building's siding. Maintenance and wear-and-tear exclusions typically exclude coverage for damage by birds. On the other hand, nearly all building policies cover the perils of fire, windstorm, and hail.

Which of the following is NOT a necessary element of a contract? offer consideration acceptance of an offer written terms

Written terms

Water runoff from Sam's air conditioner eventually stained the expensive tile blocks in his neighbor's patio. Barring an exclusion, Sam's homeowners policy will cover the property damage liability claim if it involves an occurrence. Is this an occurrence? No, because the damage was gradual. No, because a stain is not property damage. Yes, because occurrences include continuous or repeated exposure to the same harmful conditions. Yes, because Sam could have prevented the damage.

Yes, because occurrences include continuous or repeated exposure to the same harmful conditions. An occurrence can include not only sudden accidents but also losses arising from continuous or repeated exposure to the same harmful conditions.

A person who commits insurance fraud can be punished by all of the following EXCEPT: -a fine equal to the compensation received for the illegal act -imprisonment for up to four years -restitution -fine of up to $50,000

a fine equal to the compensation received for the illegal act

If a group of insureds are rated by class, they will be exposed to the same risks file the same claims be charged the same premium rate experience the same losses

be charged the same premium rate Insureds who share similar characteristics with others may be charged the same premium rate as a class.

Because Jasper's homeowners insurance policy includes sublimits on certain types of property, he buys a scheduled personal property endorsement. With this, he can specifically cover all the following items EXCEPT: his golf clubs his gun collection his coin collection his violin

his gun collection Guns are not among the nine types of personal property eligible for coverage on a scheduled personal property endorsement.

Making a false statement in an insurance policy application to obtain a benefit from the insurer is known as: -unfair discrimination -coercion -inducement -misrepresentation

misrepresentation

When referring to the subject line that is being insured under an insurance policy, the term that is used is: A. peril B. risk C. exposure D. hazard

risk

Lucy owns a variety of valuable items, including expensive jewelry, a collection of fine paintings, several mink garments, and her grandfather's restored DeSoto auto, which she drives on special occasions. A personal articles floater can be used to cover all of the following items EXCEPT: the DeSoto the jewelry the paintings the mink garments

the DeSoto Autos-even antique ones-are not eligible for coverage under a personal articles floater and should be covered under an auto policy.

Jeanine is employed by an insurance agency that represents only one insurance company. How is the insurance company most likely marketing its insurance? A. The independent agency system B. The exclusive agency system C. Insurance brokers D. Direct response marketing

the exclusive agency system

It would cost $500,000 to replace Angel's home today with an identical home at the same location. According to her HO 3 policy, no depreciation will be deducted when settling a loss if she buys coverage of at least: $500,000 $450,000 $400,000 $250,000

$400,000 The homeowners form provides replacement cost coverage on buildings with no deduction for depreciation if the insured purchases a limit of insurance that equals at least 80 percent of the full replacement value of the building at the time of the loss.

An insurer or producer must notify its current customers of its privacy policies or practices at least one every how often? -18 months -24 months -12 months -6 months

12 months

Bernard's homeowners insurance policy refers to an "insured location." Which one of the following locations would NOT qualify as an insured location? dorm room that Bernard occupies while enrolled in a summer course Bernard's office in a downtown building owned by his employer Bernard's cemetery plot basement of Bernard's home

Bernard's office in a downtown building owned by his employer Although the definition of "insured location" is broad enough to include even a cemetery plot or a dorm room where the insured is temporarily living, it does not include an office in an employer's building.

which of the following is an example of misrepresentation on an insurance application? carol answers yes to the question asking if her home has a carbon monoxide detector when it doesn't, because she believes the smoke detectors serve that purpose Joe answers no to a question asking if any member of his household has had a moving violation in the past two years, not knowing his wife received a speeding citation a year ago. Bill answers yes to a question asking if he has ever declared bankruptcy, knowing that eight years ago he filed for bankruptcy protection. Karen is not asked, and does not mention, that she was found guilty of insurance fraud 15 years ago.

Bill answers no to a question asking if he has ever declared bankruptcy, knowing that 5 years ago he filed for bankruptcy protection.

Adam is a producer at ABC insurance co. He becomes a professor at the commuinity college and no longer sells insurance, so ABC terminates his appointment on May 1. ABC must notify the director of Insurance of this termination by: -may 14 -may 31 -may 7 -may 21

May 31

Federal legislation which protect privacy of information relevant to insurance transactions include all of the following EXCEPT: Gramm-Leach-Bliley Act McCarran-Ferguson Act Health Insurance Portability and Accountability Act Federal Trade Commission Act

McCarran-Ferguson Act The McCarran-Ferguson Act of 1945 granted states principal jurisdiction to regulate the insurance industry.

Bill failed to satisfy the continuing education requirements to keep his producer's license active in Michigan. One year later, he decides to renew his license. Can he do so? -Yes, if he pays the renewal fee -Yes, if he fulfills the continuing education requirement -No; he must apply for a new license -No; he must wait one more year

No; he must apply for a new license

Which kind of insurer involves mutual agreements to indemnify the insureds from loss? A. Reciprocal insurer B. Mutual insurer C. Lloyd's Association D. Stock Insurer

Reciprocal insurer

After every snowfall, Sam removes the snow from the sidewalk that leads to his front door. His actions are an example of: A. Risk sharing B. Risk Prevention C. Risk Avoidance D. Risk Transfer

Risk Prevention

Cindy and Sandy are insurance producers. Although both sell auto insurance, Cindy sells policies for several insurance companies, while Sandy sells policies for one company. Which statement is correct? A. Both are exclusive producers B. Both are independent producers. C. Cindy is an exclusive producer, and Sandy is an independent producer. D. Sandy is an exclusive producers, and Cindy is an independent producer.

Sandy is an exclusive producer, and Cindy is an independent producer.

Insurance is primarily regulated at which level of government? Federal Regional State Municipal

State Insurance is regulated primarily at the state level, though federal regulations also govern the insurance industry, particularly with respect to privacy protection and anti-terrorism protection.

Most of the coins in Kristin's numismatic collection are merely old American coins with a total value of less than $1,000. However, she has four very unusual coins, each of which is worth about $2,000. In her personal articles floater, how should these four unusual coins be addressed? They should be defined. They should be scheduled. They should be excluded. They should be covered on a blanket basis.

They should be scheduled. It is advisable to schedule valuable items because blanket coverage is limited to $250 per item and $1,000 per collection.

Ida's boutique at a shopping mall escapes damage when a portion of the atrium roof caves in. However, her business came to a sudden halt when the debris blocks access to her store. Does Ida's businessowners policy cover the resulting loss of income? No, because the BOP provides neither business income nor extra expense coverage. No, because the BOP includes extra expense coverage but not business income coverage. Yes, because the BOP's business income and extra expense coverage applies when a business interruption is caused by damage to any area used to gain access to the insured's premises. No, the BOP's business income and extra expense coverage does not apply because Ida's property was not damaged.

Yes, because the BOP's business income and extra expense coverage applies when a business interruption is caused by damage to any area used to gain access to the insured's premises. Coverage applies to cessation of the insured's business activities due to uninhabitability of described premises. This includes any area used to gain access to the insured's premises.

Clare, a convenience store owner, accepts a $100 bill from a customer who buys a pack of cigarettes. Her bank tells her the bill is counterfeit. Does her businessowners policy cover this loss? Yes, because the policy provides limited coverage for loss due to the insured's good faith acceptance of illegal goods. No, because the policy excludes coverage for any type of monetary loss. No, because the policy excludes coverage for illegal goods. Yes, because the policy provides up to $1,000 coverage for loss due to the insured having accepted counterfeit money.

Yes, because the policy provides up to $1,000 coverage for loss due to the insured having accepted counterfeit money. The money orders and counterfeit money additional coverage provides $1,000 coverage for loss due to the insured having accepted counterfeit money.

A person who commits insurance fraud can be punished by all of the following EXCEPT: -restitution -a fine equal to the compensation received for the illegal act -fine of up to $50,000 -imprisonment for up to 4 years

a fine equal to the compensation received for the illegal act

Because Celina had three auto accidents during the past nine months, ABC Insurance Company does not want to provide coverage after the current policy expires. What will ABC send Celina to notify her of its decision? an expiration notice a cancellation notice a bill for the next year's premium a nonrenewal notice

a nonrenewal notice Insurers are usually willing to renew an expiring policy for another policy period. If an insurer decides to nonrenew the policy, it sends a nonrenewal notice to the named insured with sufficient advance notice to comply with policy provisions.

Although a business with fluctuating property values can use the value reporting form, a business whose property values vary on a predictable, seasonable basis every year can avoid the need for periodic reporting by using: a nonreporting form a retrospective rating endorsement an inflation guard a peak season endorsement

a peak season endorsement A peak season endorsement avoids overinsurance during the insured's slack season (or underinsurance during the peak season) by setting a higher limit for only the period specified in the endorsement.

Which one of the following legally qualifies as an attractive nuisance? an artfully painted garbage can behind a neighbor's garage that attracts flies a swimming pool in a homeowner's backyard that neighborhood children use, without the owner's permission, while the owner is at work a billboard with a pretty picture on the side of the highway an ornate Christmas display in a neighbor's front yard that attracts spectators

a swimming pool in a homeowner's backyard that neighborhood children use, without the owner's permission, while the owner is at work An attractive nuisance is attractive to curious children who could be injured by it, even if the children are technically trespassers.

Darnell manufactures building components at a constant rate. When sales are slow, the finished-goods inventory increases, and vice versa. Sales depend on the current construction market. Therefore, the policy covering Darnell's fluctuating inventory should include: a building laws endorsement a peak season limit of insurance endorsement an inflation guard a value reporting form

a value reporting form The reporting form coverage available with the value reporting form can be useful to a business with unpredictable, fluctuating property values at risk.

In the context of property or casualty insurance policy, which of the following is personal property? -a patio -trees -a house -an automobile

an automobile Real property includes land, buildings, and other structures attached to the land. All other intangible items, including automobiles are considered personal property.

Carter wants reimbursement for his medical expenses after he was injured in Maxine's home. For Maxine's insurer to pay his medical expenses, what must Carter do? sue Maxine for personal injury first submit a claim under his personal health insurance policy prove that his injuries were caused by Maxine's negligence allow her insurer access to his medical records

allow her insurer access to his medical records Fault or negligence is not required for medical expenses to others coverage to apply. However, the insurer must have reasonable access to the claimant's medical records to validate the claim.

Storm damage to utility wires caused a power surge that ruined Delmer's 60-inch flat panel TV. Delmer submitted a homeowners insurance claim that was denied because his policy, like almost all policies on buildings and their contents, excludes coverage for: artificially generated electrical current lightning electronic equipment televisions

artificially generated electrical current Almost all policies on buildings and their contents cover lightning damage but exclude coverage for damage to electronic equipment caused by short circuits, power surges, brownouts, and so forth.

Matt, a parcel delivery driver, delivers a package to Christa's front porch where he is attacked by Christa's bulldog. In determining the degree of care that Christa owed to Matt, how would the courts probably classify Matt? as an invitee as a trespasser as a solicitor as a licensee

as an invitee An invitee, such as the driver for a parcel delivery service, is invited onto the premises for the owner's benefit.

A fan in the stands was hit on the head by a foul ball during a baseball game. His attempt to sue the ball club and the stadium was rejected by the court due to the doctrine of contributory negligence assumption of risk absolute liability comparative negligence

assumption of risk The assumption of risk defense argues that if the plaintiff knows (or should reasonably know) there is a substantial possibility that he or she could be injured, and yet voluntarily exposes himself or herself to that danger anyway, the defendant will not be liable for injuries resulting from that exposure.

Claude buys a DP 2 policy to cover the unfurnished single-family home he rents to a tenant. The policy includes only Coverage A-Dwelling. What does the dwelling policy NOT cover? built-in kitchen cabinets attached garage canoe stored in the attic wall-to-wall carpeting

canoe stored in the attic A canoe is personal property and does not qualify as a building component, so it is not covered under Coverage A.

Dixie's business personal property coverage of her building and personal property commercial property form covers almost everything in her barbershop, but NOT: electric clippers and other tools of her trade chairs used for waiting customers cash in the cash register the coffee pot

cash in the cash register Money is on the list of property not covered.

Sally was seriously injured when she collided with Frank at an intersection. A court determined that the accident was 20 percent Sally's fault, so she was entitled to recover 80 percent of her damages from Frank. The defense was based on the doctrine of: comparative negligence absolute liability contributory negligence assumption of risk

comparative negligence Under the comparative negligence doctrine, the amount of the plaintiff's recovery is reduced by the portion of his or her fault. Because Sally was 20 percent at fault, the amount of damages that she would otherwise be entitled to recover is reduced by 20 percent.

When meeting with a prospect to discuss insurance, Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from buying its policies. Which unfair trade practice has Tyler committed? -unfair discrimination -defamation -rebating -coercion

defamation

Food products in Dolly Deli's refrigerated cooler would be ruined if the electrical supply is interrupted for more than a few hours. The deli adds the utility services-direct damage endorsement to its businessowners policy and schedules overhead transmission lines. If Dolly Deli loses electrical power because a windstorm downs power lines, what, if anything, will the policy cover? lost business income alone direct damage alone nothing, because windstorm is not a covered peril direct damage and lost business income

direct damage alone The utility services-direct damage endorsement covers direct damage loss only. Coverage for business income or extra expense losses requires a different endorsement.

Michigan's Essential Insurance Act (EIA) states that an individual is eligible for home insurance if he or she owns and lives in any of the following EXCEPT: dwelling with less than 4 separate living units house dwelling with more than four separate living units condominium

dwelling with more than four separate living units EIA states that an individual is eligible for home insurance if he or she lives in and rents or owns a house, a condominium, a cooperative unit, a room, or an apartment. An individual is also eligible if he or she owns and lives in a dwelling having more than one but not more than four separate living units.

Before permitting Roofing Contractor to work on his roof, Delmar asks Roofing Contractor to give him a certificate of insurance, which serves as: a record of Roofing Contractor's past losses evidence of Roofing Contractor's financial status evidence that Roofing Contractor has purchased certain types of insurance temporary coverage until a policy is issued

evidence that Roofing Contractor has purchased certain types of insurance A certificate of insurance is a document issued by or on behalf of an insurance company as evidence that a certain type of insurance coverage with specified limits has been purchased by the party that was required to provide the certificate.

An interruption of electrical power could ruin the meat stored at Tyrone's Steak House. The business personal property coverage of his businessowners policy provides open perils coverage that: applies to a loss of electrical power because it is not specifically excluded covers property damage resulting from an interruption in a listed utility service excludes loss of electrical power that originates away from the insured premises covers damage resulting from an interruption of utilities for more than 48 hours

excludes loss of electrical power that originates away from the insured premises The BOP excludes coverage for a loss resulting from an interruption of power or other utility services that originates away from the insured's premises.

Which peril covered under the Dwelling Property 2-Broad Form cannot be covered by the Dwelling Property 1-Basic Form? falling objects volcanic eruption riot or civil commotion smoke

falling objects The broad form includes the DP 1 perils plus seven additional perils, such as falling objects.

The Farm Property-Barns, Outbuildings and Other Farm Structures Coverage Form (FP 00 14) can cover all the following types of structures, EXCEPT: silos field or pasture fences outdoor antennas and antenna towers barns

field or pasture fences Field or pasture fences are among the types of property this form does not cover.

Although she had been told that she was getting the broadest possible property coverage, Earlene is disappointed to discover that the special causes of loss form attached to a building and personal property coverage form excludes all the following perils EXCEPT: boiler explosion theft flood earth movement

flood The special causes of loss form covers theft, subject to sublimits for certain types of property. As compared with named perils forms, the special form's theft coverage is a major advantage.

Which of the following loss valuation methods is used with other buildings that have components no longer available?

functional replacement cost

Martha's home has an insurable value of $500,000, which she has insured for $300,000 under a property insurance policy with an 80 percent coinsurance clause. Ignoring any deductible that might apply, if the building sustains $20,000 in damage due to a covered peril, how much will the insurer pay? exactly $20,000 more than $20,000 nothing less than $20,000

less than $20,000 Because her property is underinsured, the coinsurance clause in Martha's insurance policy reduces the amount that the insurer will pay for a covered loss. To recover $20,000 for this loss, she should have purchased limits of at least $400,000 (i.e., 80 percent of the $500,000 building's insurable value).

Ace Bank lends Alice some money to buy a car, which Alice is paying back in installments. To protect its interest until the loan has been paid off, Ace Bank should insist that Alice's insurance policy include an endorsement that names the bank as a: loss payee mortgagee beneficiary mortgagor

loss payee The loss payable clause in the endorsement will ensure that the named loss payee (Ace Bank) will be included in any claim payment.

Quentin has a standard HO 3 policy with no endorsements. Assuming appropriate insurance to value, loss to which one of the following items would be settled on the basis of its replacement cost? awnings over the front windows brick workshop building in the backyard satellite TV dish on the roof new television in the family room

new television in the family room The workshop building is considered an "other structure" covered at replacement cost under Coverage B. The loss settlement provision values the other items at actual cash value.

Arnulfo takes his computer to Patti's shop for repairs. Patti accidentally erases the hard drive, so Amulfo sues her for the loss of the data. Patti's ISO businessowners policy will: cover the damage to the hard drive and its data cover the loss because it involves personal injury not cover the loss of the electronic data not cover the loss because it arose from a professional service

not cover the loss of the electronic data The BOP does not cover damages arising out of the loss of electronic data.

For BOP business liability coverage to apply to a loss, the loss need NOT occur within a single policy period. arise within the policy period. occur within the coverage territory. arise from the insured's legal liability

occur within a single policy period. Business liability coverage covers sums the insured is legally obligated to pay for bodily injury, property damage, and personal and advertising injury. It covers losses arising within the policy period and within the coverage territory. It also covers continuous injury that occurs during more than one policy period.

When describing the policy's coverage, the word "special" on the declarations page means the policy is a(n): broad causes of loss form modified causes of loss form basic causes of loss form open perils form

open perils form When describing the policy's coverage, the word "special" on the declarations page means it is an open perils policy.

What are the 9 common excluded perils that are common with all property insurance forms?

ordinance or law earth movement government action intentional loss nuclear hazard utility services neglect war and military action water, including flood, mudslide, and related water losses

Paving Contractor has a contractors' equipment floater that covers its paver and other scheduled equipment. If the paver is totally destroyed by a covered peril during the policy term, what will the insurer do? pay the claim and refund the unearned premium on the paver decline the claim and refund the entire premium on the paver pay the claim but make no refund of premium pay the claim and cancel Paving Contractor's policy

pay the claim and refund the unearned premium on the paver The reinstatement of limit after loss provision in the common inland marine conditions form provides that, when there is a total loss to a scheduled item of property, the insurer will pay the claim and then refund the unearned premium on that item.

Laurie applies for a businessowners policy to cover her small enterprise. What kind of business would make her ineligible for a BOP policy? discount retail store pinball and video game arcade 24-hour diner doughnut shop

pinball and video game arcade Places of amusement are ineligible regardless of their size.

The liability section of the ISO businessowners policy has an aggregate limit for: personal injury fire legal liability products and completed operations property damage

products and completed operations A products-completed operations aggregate limit applies per policy period to all injury or damage from the products-completed operations hazard.

Which provision is NOT found in the common policy conditions section of a businessowners policy? fraud cancellation property loss settlement other insurance

property loss settlement The common conditions section applies to both property and liability sections of the policy,. A condition that applies only to property would therefore not appear in the common policy conditions section.

As part of its reforms, the federal Fair Credit Reporting Act; prohibits insurance companies from using credit reports to determine whether an applicant is eligible for insurance requires insurers to obtain credit reports on all insurance applicants led to the establishment of FAIR plans that cover hard-to-insure property requires insurance applicants be informed in advance that the insurer might order a credit report

requires insurance applicants be informed in advance that the insurer might order a credit report The Fair Credit Reporting Act allows insurers to use credit reports in determining an applicant's eligibility and requires that insurance applicants be informed in advance that a credit report might be ordered.

BOP eligibility is based on a business's: size and type past loss experience financial reports geographical location

size and type A business's eligibility for BOP coverage depends on its size and type.

Randolph has bought grain and packaged it for sale in pet stores for the past four years. In the third year, customers claimed that the grain sickened their pets. He then discovered that he was using grain treated with a pesticide. Randolph had BOPs for each of these four years. Which BOP will cover his liability? the first three BOPs, which were in effect from the time the damage began until the time he discovered it the first BOP, which was in effect when he began using the grain the third year's BOP, which was in effect when he became aware of the injury or damage the fourth year's BOP, which is still in effect

the first three BOPs, which were in effect from the time the damage began until the time he discovered it Coverage for continuous injury is assigned to the policies in effect from the time the injury or damage first occurred until the insured became aware of the injury or damage.

Because he doesn't own an airplane, Lanny thinks it silly that his homeowners insurance policy contains several exclusions that apply to aircraft. What is the purpose of these exclusions? to remove coverage for uninsurable risks to eliminate or reduce overlapping coverage to remove coverage not needed by a typical insured to reduce the incentive to create losses and provide an incentive to prevent losses

to remove coverage not needed by a typical insured Like most people, Lanny does not need aircraft insurance. The relative few that do should purchase separate aircraft insurance.

After paying a vandalism claim under Sam's commercial inland marine policy, the insurer exercised its rights under the policy and attempted to recover all or part of its loss from the person who caused the covered damage and was apprehended by police. What condition in the inland marine common conditions form gives the insurer these rights? control of property concealment, misrepresentation, or fraud loss payment transfer of rights of recovery against others to the insurer

transfer of rights of recovery against others to the insurer The insurer's subrogation rights are described under the transfer of rights of recovery against others to the insurer provision.

Erin wants to protect her warehouse inventory against damage from extremely hot and cold temperatures resulting from a loss of electrical power. What endorsement should her businessowners policy include? artificially generated currents utility services-direct damage utility services-time element protective safeguards

utility services-direct damage The utility services-direct damage endorsement covers losses resulting from damage to the electric utility company's equipment by a covered peril.

All of the following causes of loss are commonly listed as excluded perils in open perils property insurance policies, EXCEPT: -flood -vandalism -wear and tear -war

vandalism