AINS 103 Test

Allen, a sole proprietor, is crossing the street when he is struck by a passing uninsured auto. He sustains $2,500 in medical bills and $1,000 in lost wages. Allen's business auto policy has $100,000 liability limit and $5,000 medical payments limit. Assuming there is no other coverage, how much will his business auto policy pay?

$2,500

Classic Cashmere Shop (CCS) is insured by a commercial package policy. The Business Income (and Extra Expense) Coverage Form (BIC) has a $900,000 limit of insurance and an 80 percent coinsurance provision. CCS experienced a fire loss which resulted in a $300,000 loss of business income. How much will the insurer pay for this BIC loss if the coinsurance basis at the time of the loss was $1,500,000?

$225,000

A building contractor uses lower grade materials than called for in the specifications for an office building. A year after the building was completed, a balcony collapses, injuring several employees and customers and causing damage to the building and contents. For the building construction company, this is an example of

A completed operations liability exposure.

The Liquor Liability exclusion would apply to which one of the following businesses insured by an ISO businessowners policy?

A convenience store that sells beer

Which one of the following would qualify as an uninsured motorist pursuant to a uninsured motorist UM endorsement on a business auto policy?

A hit-and-run driver

Perils are an important aspect of property insurance. Which one of the following statements is correct with respect to perils?

A peril is the actual means by which property is damaged or destroyed such as fire, lightning, windstorm, hail, or theft.

The commercial property coverage part of a commercial package policy contains one or more commercial property coverage forms. Each coverage form typically includes all of the following, EXCEPT:

A range of covered peril

Which one of the following claims would be covered under Coverage B—Personal and Advertising Injury Liability of the Commercial General Liability Coverage Form (CGL)?

A store manager accuses a young man of shoplifting, apprehends him, and locks him in a storage room until the police arrive. When it is discovered that the young man is innocent, he files a claim against the store.

Richard's Clothing Store has a $500,000 Business Income (and Extra Expense) Coverage Form on which there is an 80 percent coinsurance clause. A fire swept through the store. Richard's Clothing Store estimates that its net income plus all operating expenses for the policy period would have been $1,875,000. The estimated business income loss is $300,000. How much will the insurer pay?

$100,000

During a mid-year review of one of her large accounts, Annette noticed that the frequency and severity of auto losses had been trending downward over the past 18 months. When she consulted with the account's risk management team, she learned that the insured had installed telematics devices in many of their vehicles. This information would help support Annette's decision to

Propose a premium reduction at renewal time.

Joe Motors, which services automobiles, wants to maintain the goodwill of its customers. This is best accomplished by

Purchasing garagekeepers insurance.

The Auto Medical Payments Coverage endorsement to the business auto policy provides coverage for

Reasonable and necessary medical and funeral expenses incurred by a person injured while occupying a covered auto.

By automatically including basic coverages for all insureds, the businessowners policy (BOP) helps the insurer

Reduce adverse selection.

Which one of these offenses would not be considered a personal and advertising injury under Coverage B of the Commercial General Liability Coverage Form?

Refusing to hire a qualified job applicant because of his ethnicity

Workers compensation benefits include which one of the following?

Rehabilitation benefits

The Commercial General Liability (CGL) Coverage Form defines the term "occurrence" as

An accident, including continuous or repeated exposure to substantially the same general harmful conditions.

The Morlyn Corporation has a Business Auto Coverage Form (BACF) that provides liability coverage for any auto. In addition to the named insured, which one of the following would also be an insured under Morlyn's BACF when driving a covered auto?

An employee driving a vehicle leased by Morlyn for business purposes

Hill Top Wholesale experienced a loss from a fire at its warehouse. When the owner, Joann, called to report the loss to the commercial property insurer, she was reminded of certain obligations that the insured must meet in order for the coverage to apply. There are also certain rules that the insurer must follow. Which one of the following components of the commercial property coverage part of the commercial package policy would include these obligations and rules?

Commercial property conditions

A contractor is hired to install a new concrete sidewalk in front of a store. Several weeks after the sidewalk was installed, the concrete buckles and a passerby trips and falls on the buckled sidewalk. The passerby sues the contractor to recover medical expenses incurred due to the fall. This commercial liability loss is categorized as

Completed operations liability.

A vehicle owner had a tire store install four new wheels and tires on the vehicle. On the way home from the store, one of the wheels came off, causing the vehicle to accidentally run off the road and strike a tree. The vehicle owner sued the tire store for failing to properly tighten the lug nuts on the vehicle. The loss exposure faced by the tire store in this case is known as

Completed operations liability.

John purchased a new lawnmower two years ago. After significant use, the lawnmower needed servicing. A repairman sharpened the blade, but he failed to reattach it properly to the lawnmower. When John was using the lawnmower, the blade flew off and seriously injured John's daughter. From the standpoint of a commercial liability loss for the repair shop, this is an example of

Completed operations liability.

Property insurance policies use the term "personal property" to refer to the

Contents in and around a building.

Extra expenses are expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption. Which one of the following is an example of an extra expense?

Cost to rent temporary office space

Which one of the following would be covered under the Extra Expense insuring agreement of the Business Income (and Extra Expense) Coverage Form?

Costs to move to a temporary location

Cyber risk intellectual property loss exposures include

Cyber extortion of trade secrets.

Policies for the crime loss exposure for financial institutions are called "bonds" because

Employee dishonesty, a key coverage, was traditionally called a "fidelity bond."

JG Painting is insured under a monoline commercial auto policy. The business is located in Pennsylvania, but also does work in New Jersey and Delaware. Which one of the following would be used to add PIP insurance coverage to an auto policy?

Endorsements

Suzanne is a commercial lines underwriter. Which one of the following components of the general liability coverage forms would she use to tailor the form to meet the specialized needs of an insured?

Endorsements

In business income insurance, the expenses that an organization would not have incurred if the business interruption had not occurred are called

Extra expenses.

Injury arising out of which one of the following offenses could be covered under Coverage B of the Commercial General Liability policy?

False arrest

James is in the process of forming his own brokerage company which will include several employees. James will be best protected by purchasing which one of the following to cover the crime loss exposures of his company?

Financial Institution Bond.

The Grandfather Clock Company (GCC) ships clocks all over the U.S. It ships frequently over 10,000 shipments each year and ships its goods by common carrier. All of its shipping contracts say "FOB, buyer's address." GCC believes that it needs insurance for the risk that its clocks will be damaged during shipment. Which one of the following is the best insurance advice for GCC?

GCC needs insurance and should purchase an annual transit policy.

Austin cut his finger while working at a jobsite for Walsh Builders. He had to go to a hospital, where he received 5 stitches and a tetanus vaccine. When he received the hospital bill for $990, Austin made a claim under Coverage C—Medical Payments of Walsh Builders' CGL policy. Which one of the following reasons would the CGL insurer use for denying Austin's claim?

He is entitled to workers compensation benefits.

Automobile liability exposures can result from

Hiring or borrowing an automobile.

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP) deductible?

If an occurrence involves a loss that affects more than one category of covered property and a separate limit of insurance applies to each category, losses to all categories are totaled and the deductible applied to that total amount.

Which one of the following lists the two distinct benefits of enterprise risk management (ERM)?

Improved decision making and better communication

Which one of the following supply chain exposures can a business mitigate by carefully wording contracts and diversifying suppliers?

Loss of supply due to external events

When a clothing manufacturer decides to expand the sale of its clothing line by offering internet purchases, it creates new exposures not otherwise covered, or not fully covered, by a traditional policy. These include

Loss or damage caused by computer viruses.

Fancy Dress Shop is a small specialty clothing boutique for women. Liability claims against Fancy Dress Shop would most likely arise from its

Premises and operations exposure.

Which one of the following statements regarding process mining is true?

Process mining differs from typical data mining in that process mining applies results to an entire process.

Which one of the following is the first step in the enterprise risk management (ERM) process?

Scan the environment

Hank is a new commercial insurance producer. He is walking down the main street of Springfield trying to determine which businesses might be eligible for the businessowners policy (BOP) and which would not be eligible. Which one of the following main street businesses would be ineligible for BOP coverage?

Springfield Bank

While performing duties for the business, all of the following would be an insured under Business Liability Coverage of a partnership's businessowners policy (BOP), EXCEPT:

Stockholders

Which one of the following best describes real property?

Tangible property that includes land, structures permanently attached to the land, and whatever is growing on the land.

Leslie suffered a severe burn to her hand when her microwave oven manufactured by LH Appliances caught fire. The fire also caused damage to her kitchen cabinets. Two years later, Leslie decided to file a suit against the manufacturer when she learned that microwaves manufactured by LH Appliances had been found responsible for several other fires. LH Appliances was insured by an occurrence version of the commercial general liability (CGL) coverage form with no deductible or endorsements. Which one of the following correctly describes how LH Appliances' CGL will apply to the claim?

The CGL will defend the insured, and pay both for both the bodily injury and damages to the cabinets if found liable.

In an effort to control its loss exposures, Furlong Distributing uses a network of objects that transmit data to each other and to central hubs through the internet. This network is known as

The Internet of Things.

Which one of the following statements best describes the Causes of Loss—Special Form?

The Special Form provides coverage for direct physical losses other than those that are specifically excluded.

Ella is a producer for Westfork Mutual. She recently met with the owners of The White Canary Motel and is trying to determine if it is eligible for the ISO businessowners policy (BOP). Which one of the following facts about The White Canary Motel would prevent it from being eligible for the BOP?

The White Canary Motel closes from January 1 to March 1 every year.

One way in which producers can help clients identify supply chain risk is through

The use of flowcharts.

BBC Manufacturing (BBC) has an unendorsed Commercial General Liability (CGL) Coverage Form. BBC has expanded its sales outside the United States. Due to injuries from alleged defective products of BBC, lawsuits are brought in Europe, Mexico, Canada and Puerto Rico. Which one of the following statements describes the extent for which BBC's insurer will provide coverage or defense in these jurisdictions?

There is coverage and defense for Canada and Puerto Rico, since these are covered territories.

Which one of the following explains why an employer needs employer's liability insurance in addition to workers compensation insurance and a commercial general liability (CGL) insurance policy?

To cover claims not covered by workers compensation statute

Hope Hardware is insured under a businessowners policy (BOP) with a $250,000 limit for Business Liability Coverage. A customer tripped over a box in one of the aisles, and struck her head on a shelf. The customer filed a suit against Hope Hardware for medical expenses, pain and suffering, and lost wages. The BOP insurer spent $25,000 defending Hope Hardware in court, but the customer ended up being awarded $230,000. The court also assigned $2,500 in prejudgment interest. What is the total amount that Hope Hardware's BOP insurer will pay for this claim?

$257,500

Billy owns a baseball souvenir store in Cooperstown, NY. He insured his store under a Building and Personal Property Coverage Form (BPP) with a $275,000 limit and a $1,500 deductible. A large fire in the store caused significant damage amounting to $310,000 in covered damages. How much would Billy's insurer pay under his BPP?

$275,000

Julian is the owner of The Clock Shop, a retail store selling a wide variety of clocks for the home and office. He leases the space in a shopping center that contains three other retail stores. The Clock Shop is covered under a businessowners policy (BOP) with a $200,000 limit of insurance for its business personal property and a $1,000 deductible. Julian did not purchase any optional coverages. One evening a fire broke out in one of the neighboring stores, and spread to The Clock Shop. The Clock Shop claimed the following damages: Damage to merchandise on display and in storage $50,000 Damage to a computer and printer in the office area $4,500 Damage to a personalized sign attached to the building $900 How much will the BOP insurer pay for this loss?

$54,400

Glorious Gifts is a retail store located in a shopping center along with four other retail tenants. It is insured under a businessowners policy (BOP) with a $300,000 limit for Personal Property and a $1,000 deductible. One day during business hours, a fire started in the pizza shop next door and spread to Glorious Gifts. Everyone was able to escape safely, but Glorious Gifts suffered the following damages: $75,000 in store merchandise, $10,000 in shelving units that had been installed, a $3,000 computer, and $1,500 in cash. How much will the BOP insurer pay?

$87,000

In equipment breakdown insurance, a fired pressure vessel constructed of cast iron or steel in which water is heated to produce steam or hot water is a

Boiler

The insurance agent advised the owners of Perfect Dry Cleaning that bailees' customers polices cover

Both legal liability exposure and goodwill exposure.

Which one of the following is typically covered by a builder's risk policy?

Building materials and supplies

Which one of the following types of loss exposure is typically covered by a businessowners policy (BOP)?

Business personal property

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP)?

Due to coverage extensions, it is possible for the total payment for one loss to exceed the policy limit.

Coverage will apply under the liability insuring agreement of the Business Auto Coverage Form (BACF) for bodily injury or property damage

Caused by an accident.

Anita is the claims manager for the Mid-Atlantic region. She knows that the longer that liability claims stay open, the higher the final settlement cost. Anita wants to use data analytics to help her predict the final settlement amount of slip and falls claims that remain open for more one year. She would also like to see how much the amount varies in the different geographic areas within her territory. Which one of the following methods would help Anita predict the cost of the claims with those attributes?

Cluster analysis

The owners of BB Hotel wanted to make sure that they were covered for damage to the air conditioning and refrigeration equipment. In equipment breakdown insurance, air conditioning and refrigeration equipment includes components such as

Coils

Which one of the following perils would be covered under the commercial property policy broad form but not covered under the basic form?

Damage due to weight of snow

An email was sent to a company's employees containing a harmful attachment. Several employees opened the attachment which allowed hackers to obtain customer contact information. This cyber risk loss is

Damage to intangible property.

Many insurers have embraced the use of data mining in the claims process because of its ability to help do which one of the following?

Detect fraudulent claims

Gilbert Industries insures its building and personal property under the Building and Personal Property Coverage Form (BPP). A large section on the building was destroyed by fire after the building was struck by lightning. Because the building was over 25 years-old, there had been a number of building code changes since it was constructed. In order for Gilbert Industries to comply with these new codes, the cost of rebuilding would increase. Which one of the following additional coverages under the BPP would provide coverage for these costs?

Increased cost of construction coverage

Under Coverage A of the commercial general liability coverage form (CGL), property damage would include all of the following, EXCEPT:

Infringement of copyright

The unauthorized intrusion into a company's computer network resulting in damage to intellectual property is best classified as which one of the following types of cyber liability exposures?

Intangible property

Which one of the following statements is true regarding the Business Income (without Extra Expense) Coverage Form?

It covers only extra expenses that reduce the business income loss.

In which one of the following ways does process mining differs from other data analysis techniques used by insurers?

It looks at the entire process rather than one specific area.

Which one of the following statements is true about an excess liability policy?

It provides coverage no broader than is provided by underlying polices.

Jenn is a producer for Goshen Mutual. She is trying to determine if a new prospect, Mr. Cooper's Café is eligible for the businessowners policy (BOP). Mr. Cooper's Café is a small restaurant located on the first floor of an office building, serving only breakfast and lunch. Cooking on the premises is limited to coffee makers, a grill, and microwave appliances. It has seating for 10-15 people, and large refrigerated cases with food, beer and wine to-go. Which one of the following factors about Mr. Cooper's Café would make it ineligible for BOP coverage?

It sells beer and wine.

The management of Maryland Marine Co. (MMC) must ensure that proper coverage is obtained for work-related injuries. The employee population of MMC is a mixture of full-time and part-time employees as well as some casual employees for one-time tasks. Much of MMC's work is done by independent contractors and temporary employees during peak seasons. Which one of the following statements about these persons is true?

Many states workers compensation statutes exclude casual labor (temporary employees).

Chuckie's chicken distributor researches the benefits of consuming chicken versus consuming beef. In November 2011, Chuckie's publishes a brochure outlining the potential health hazards of consuming beef and explaining why chicken is a healthier alternative. Chuckie continues to publish and distribute the same brochure for six months. In March 2012, several beef distributors file a suit against Chuckie's for personal and advertising injury. Which one of the following exclusions would apply to this claim under Coverage B of Chuckie's Commercial General Liability Coverage Form (CGL) with a policy period of January 2012 - January 2013?

Material published prior to the policy period

Umbrella liability insurance

May cover some claims that are not covered by underlying liability insurance.

Which one of the following statements is true regarding Coverage C—Medical Payments of the Commercial General Liability policy?

Medical payments coverage is a means of making prompt settlements.

With advancements in technology, underwriting data is becoming increasingly abundant and more reliable. These technological advancements changed underwriting in which one of the following ways?

More insurers are turning to automated systems.

Lucy, the owner of Lucy's Flower Shop, was delivering a vase of flowers to a customer, Mrs. White. When Mrs. White opened her front door, her dog ran outside, knocking the flowers from Lucy's hands, and causing the vase to shatter and injure Mrs. White. Although the customer insisted that she would be fine, Lucy received a medical bill for injuries to Mrs. White two years later. The medical treatment had been received one week before Lucy received the bill. Lucy explains the situation to her insurer and requests coverage under her Commercial General Liability Coverage Form (CGL). Which one of the following is correct regarding whether the medical expenses will be covered under Coverage C—Medical Payments of the CGL?

No, because the medical expenses must be incurred and reported to the insurer within one year after the date of the accident.

The Coverage B—Personal and Advertising Injury Liability of the Commercial General Liability (CGL) Coverage Form parallels the Coverage A insuring agreement, but personal and advertising injury applies to an

Offense arising out of the named insured's business.

Which one of the following risk categories is generally eligible for coverage under a businessowners policy (BOP)?

Office buildings

Which one of the following entities would likely have the greatest completed operations loss exposure?

Paul the plumber

During a business interruption, some of the organization's expenses, called continuing expenses, will continue, and other expenses, called noncontinuing expenses, will not continue. Which one of the following is an example of a continuing expense?

Payroll of key employees

Joan was using a screwdriver to open a can of paint, when the tip of the screwdriver broke off and hit her above the eye. She rushed to the eye doctor because her eye hurt and kept watering. After a thorough exam, the eye doctor sent her home with some eye drops and a bill for $450. Joan paid the bill and immediately filed a claim against Blue Tools (the screwdriver manufacturer) under Coverage C—Medical Payments of its CGL policy. Which one of the following statements is correct regarding this claim?

The claim would not be paid under Coverage C because it falls under the products-completed operations hazard.

A carrier that is prevented by an accident from delivering the cargo aboard its ship may face an exposure called loss of freight, which is

The compensation the carrier receives for transporting cargo.

Rose's Flower Shop has its building and business personal property insured under a businessowners policy (BOP). The building was struck by lightning and the resulting fire caused significant damage to both the building and personal property. Which one of the following would be excluded under the BOP?

The cost of upgrades due to local ordinances

Which one of the following explains why the same "Workers Compensation and Employers Liability Insurance Policy" is able to be used in all states even though the provisions of the various state laws and the employee benefits have many differences?

The coverage provided by Part 1 obligates the insurer to pay all benefits required of the insured by the workers compensation law or occupational disease law of any state listed in Item 3.A of the Information Page.

Brick Bakery is insured under a businessowners policy (BOP) with a $300,000 limit for Building and a $150,000 limit for Personal Property. A fire loss at the bakery resulted in damage to both the building and personal property. Which one of the following would be considered personal property under Brick Bakery's BOP?

The furniture used for outdoor seating

Which one of the following would be considered an extra expense under the Business Income (and Extra Expense) Coverage Form of the commercial package policy?

The increased cost of rent at a temporary location

Which one of the following statements is correct regarding a commercial general liability policy with an occurrence coverage form?

The injury or damage must happen during the policy period.

When Sylvester Properties suffered a $500,000 loss of business income, it filed a claim under the Business Income (and Extra Expense) Coverage Form (BIC) of its commercial package policy. In order for the loss to be covered, the loss of business income must be due to a necessary suspension in operations caused by a direct physical loss or damage to property at the premises for which BIC is shown in the policy declarations. Which one of the following is also part of the criteria for the loss to be covered?

The loss or damage must be caused by a covered cause of loss.

The Neopolitan is insured under a businessowners policy (BOP) for both building and business personal property. Which one of the following would be covered under the definition of a building under The Neopolitan's BOP?

The outdoor lighting fixtures

Dooley's Restaurant is insured under a commercial package policy (CPP) with the Business Income (with Extra Expense) Coverage Form. The business suffered a $400,000 loss of business income when it was forced to suspend operations after flood waters damaged the basement and first floor of the restaurant. Which one of the following is an acceptable reason for the CPP insurer to deny the business income claim?

The policy's covered causes of loss did not include flood.

Wilson LLC owns an apartment building insured under a businessowners policy (BOP). Which one of the following would be an insured under Business Liability Coverage of Wilson LLC's BOP?

The real estate manager who manages the building and grounds would be an insured under Business Liability Coverage of Wilson LLC's BOP while removing snow from the entrance area.

Lucy's Bakery is insured under a commercial package policy with the Business Income (and Extra Expense) Coverage Form. A fire loss caused significant damage to the building. When Lucy learned that it would take 9 months to repair the building, she decided to temporarily relocate to a nearby rental location. All of the following would be considered covered extra expenses under the Business Income (and Extra Expense) Coverage Form, EXCEPT:

The salary of the assistant baker and cake decorator

An insured is planning on transporting a valuable turbine from its place of manufacture to a power plant across the country. What type of inland marine policy would best meet the insurance needs to cover this cargo during the trip?

Trip transit policy

Which one of the following statements about excess liability insurance coverage and umbrella liability insurance coverage is most accurate?

Umbrella liability policies typically provide primary coverage for certain types of losses not covered by underlying insurance, while excess liability policies typically do not.

One distinction between the umbrella liability policy and the excess liability policy is that an

Umbrella policy provides broader protection than the underlying policy.

The medical expense coverage under Business Section II-Liability Coverage of the ISO businessowners policy (BOP) would cover small and reasonable medical claims for which one of the following?

Volunteer workers at the insured organization

Shady Stories, a tabloid newspaper, prints a false story about a local politician. Shady knows the story is false but thinks it will sell a lot of papers. The politician claims damages from Shady. Shady's Commercial General Liability (CGL) Coverage Form excludes coverage for this loss because the claim arose out of which one of the following?

Written material that was known to be false