Misc. Types of Insurance

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

Last year, the board of directors of Laurence Corporation voted to sell one of its subsidiaries, Eloy, Inc., which had been operating at a loss, to a competitor. Soon after the sale, Eloy's past research and development succeeded in launching a very profitable new product. Which of the following is most likely to happen?

Laurence Corporation shareholders might sue the directors and officers alleging a lack of due care in making the decision to sell the now-profitable subsidiary.

What type of property is typically eligible for FAIR plan coverage?

Rental property

Which insurance submarket presents insurance companies with the greatest risks?

Residual market

Suzette has a $1 million personal umbrella policy with a $250 retained limit (deductible) for personal liability and a personal auto policy (PAP) with a $300,000 limit. She is at fault in an auto accident that is settled for $500,000. How will this settlement amount be paid?

Suzette will pay $250, the PAP insurer will pay $300,000, and the umbrella insurer will pay $199,750.

How are umbrella and excess insurance policies alike?

They extend coverage provided by underlying primary policies.

When will coverage from a personal umbrella liability policy be activated?

When primary coverage is exhausted

Which of the following properties would most likely be eligible for coverage under a state's Fair Access to Insurance Requirements (FAIR) plan?

a residential dwelling in an inner-city neighborhood near a coal plant.

An ISO liquor liability coverage form includes two limits of insurance, called:

an aggregate limit and an each common cause limit

At least four different types of state-based auto residual market plans are available, but the majority use which of the following mechanisms?

assigned risk plan (automobile insurance plan)

An insurance agent's E&O policy covers insurance producers against errors and omissions claims brought by:

both clients and insurers

FAIR plans provide insurance coverage that is not available from insurers in the regular market. Which of the following types of coverage is NOT generally available from a FAIR plan?

business income coverage

The USDA Risk Management Agency, an agency of the U.S. Department of Agriculture, is a source of:

crop insurance

The residual market is most often the source of coverage for all of the following lines of insurance EXCEPT:

directors & officers liability insurance

State laws holding businesses that serve alcohol responsible for monitoring their patrons' alcohol consumption are generally called:

dram shop acts

Jocelyn's house is built over an abandoned coal mine. She fears the house could be damaged if the mine collapses. Fortunately, Jocelyn's state requires her insurer to provide protection against this loss in the form of what kind of insurance?

mine subsidence insurance

Nadir Manufacturing's commercial general liability policy was recently cancelled. It has been unable to buy another similar policy through the voluntary market. Its insurance broker suggests that it consider buying a policy through the residual market, where it can expect to:

pay higher rates for fewer benefits

What do FAIR (Fair Access to Insurance Requirements) plans provide?

property insurance on hard-to-insure property in certain areas

After several violations, Napoleon Bar and Grill's liquor license was revoked. Napoleon did not inform its insurer of this fact and continued to serve alcohol to its regular customers, including Brett. After a long night at the bar, Brett was involved in a serious auto accident and sued Napoleon under the applicable dram shop act. Napoleon's liquor liability insurance:

provides no coverage because Napoleon's required license was not in effect

Which of the following is NOT a submarket of the voluntary insurance marketplace?

residual market

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

Which statement is correct about insurance plans obtained through residual market mechanisms in comparison to those obtained on the voluntary market?

Consumers pay higher rates and receive more limited benefits.