bonds 2

Owners commonly withhold

5 or 10 percent retainages from payments of estimates due contractors on bonded jobs.

Which one of the following losses is covered under the Money Orders and Counterfeit Money insuring agreement of the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

A cashier unknowingly accepts a deposit of $500 in counterfeit $100 bills.

Which one of the following correctly describes a financial institution bond?

A financial institution bond is similar to an insurance policy.

Which one of the following losses is covered by the Computer and Funds Transfer Fraud insuring agreement of the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

A fraudulent entry of a computer program causing a large sum of money to be transferred to an offshore account

Which one of the following is correct regarding a coverage form for a government agency's crime exposures?

A government agency can use a government crime form developed by Insurance Services Office, Inc. (ISO).

Which one of the following losses meets the definition of "robbery" in the Inside the Premises—Robbery or Safe Burglary of Other Property insuring agreement of the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

A person enters the premises of the insured, points a gun at the cashier, and steals money from the cash register.

Which one of the following is supplemental information requested by underwriters for financial institutions seeking computer systems coverage?

A schedule of systems to be covered with a description and operating details

Which one of the following losses is covered under the Forgery or Alteration insuring agreement of the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

A supplier alters a check issued by the insured for $600 to $6,000.

Which one of the following correctly describes the information an underwriter obtains from a contractor's work on-hand report?

A work on-hand report provides information on whether the contractor is overextended.

Which one of the following correctly describes an Insurance Services Office, Inc. (ISO) loss sustained crime coverage form?

An ISO loss sustained form covers losses that occurred during the policy period and discovered no later than one year afterwards.

Which one of the following is correct regarding the employee dishonesty exposure of an insurer's claims department?

An insurer's claims department presents many employee dishonesty exposures.

Which one of the following financial reports are required by underwriters for financial institution coverage?

Annual report, CPA audit, management letter, and response

The section on applications for commercial crime coverage includes

Available coverages, requested endorsements, and space to specify limits of insurance and deductibles.

Which one of the following is ultimately responsible for the success of a business?

Board of directors

Which one of the following is correct regarding coverage for unauthorized trading losses under the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

Coverage for unauthorized trading losses is excluded under the ISO Commercial Crime Coverage Form.

Which one of the following is correct regarding coverage for vandalism under the Insurance Services Office, Inc. Commercial Crime Coverage Form?

Coverage for vandalism is excluded under the ISO Commercial Crime Coverage Form.

Which one of the following is correct regarding credit lines provided by sureties?

Credit lines are particularly useful for larger contractors.

Which one of the following is a general exclusion under the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

Data Security Breach

Which one of the following is a question an underwriter should ask about a contract for a large construction project?

Does the contract allow for a shutdown for unfavorable weather conditions?

Which one of the following is correct regarding the Insurance Services Office, Inc. (ISO) commercial crime program?

Each coverage form and policy in the ISO commercial crime program includes a discovery and loss sustained version.

Which one of the following is a solution if a contractor does not complete the work on time?

Either liquidated damages or a penalty clause is a solution.

Which one of the following is correct regarding the types of acts covered by employee dishonesty coverage and employee theft coverage?

Employee dishonesty coverage provides coverage for a broader range of acts than employee theft coverage.

Which one of the following is correct regarding coverage for an employee's forgery under the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

Employee forgery is covered under the Employee Theft insuring agreement.

Which one of the following is correct regarding employee theft coverage and employee dishonesty coverage?

Employee theft coverage is similar to employee dishonesty coverage, with key differences.

Which one of the following is correct regarding coverage for unauthorized trading losses under Financial Institution Bond Form 24?

Even with an endorsement, unauthorized trading losses will not be covered.

Which one of the following characteristics of a financial institution's managers is important to underwriters?

Experience

Which one of the following is correct regarding financial institution bond forms?

Financial institution bond forms are developed by the Surety & Fidelity Association of America (SFAA); Insurance Services Office, Inc. (ISO); and individual insurers.

Which one of the following is correct regarding financial institution bonds?

Financial institution bonds are similar to commercial crime coverage forms

Which one of the following is correct regarding the coverage provided by financial institution bonds?

Financial institution bonds provide coverage for employee dishonesty and other crime coverages.

Which one of the following is correct regarding organizations that provide financial institution coverage forms?

Financial institution coverage forms are available from the Surety & Fidelity Association of America (SFAA); Insurance Services Office, Inc. (ISO); and private insurance markets.

Which one of the following is correct regarding the crime loss exposures of financial institutions?

Financial institutions have more crime loss exposures than most organizations.

Which one of the following is correct regarding the risk to sureties from financial institution bond?

Financial institutions present higher risk of crime and dishonesty than other types of organizations do.

Which one of the following is a risk factor associated with a financial institution's historical growth?

Growth in assets, number of employees, and locations

Which one of the following is correct regarding an underwriter's evaluation of a corporation's application for employee dishonesty coverage when there is a breakdown of internal controls?

If the breakdown is serious, the underwriter is likely to decide that the entire risk is unacceptable.

Which one of the following is correct regarding the importance of informal discussions between management and the board of directors to financial institution underwriters?

Informal discussions between management and the board of directors are important because they reveal how well management and the board communicate.

Which one of the following organizations would be eligible for a financial institution bond?

Insurance company

Which one of the following is correct regarding coverage under Insuring Agreement B—On Premises of Financial Institution Bond Form 24?

Insuring agreement B offers broad coverage regarding the definition of "property" and covered locations, and it covers a broad range of named perils.

Which one of the following is correct regarding coverage under Insuring Agreement C—In Transit of Financial Institution Bond Form 24?

Insuring agreement C covers defined property while in transit in the custody of an employee of the insured or in a transportation company's armored vehicle for covered named perils.

Which one of the following is correct regarding coverage under Insuring Agreement F—Counterfeit Money of Financial Institution Bond Form 24?

Insuring agreement F covers a financial institution when, acting in good faith, it receives counterfeit money or securities of the United States, Canada, or another country in which the insured has a branch office.

Which one of the following is correct regarding information on audits and controls in underwriting commercial crime and financial institution bonds?

Internal and external audits and controls are important to underwriters.

An applicant's history of mergers and acquisitions is important to a financial institution bond underwriter because

It reveals a great deal about how the institution handles growth.

Which one of the following correctly describes a loss that is covered under the Inside the Premises—Theft of Money and Securities insuring agreement?

Loss of money and securities from a fire inside the premises.

Which one of the following explains why a surety underwriter needs extensive information and a thorough evaluation of commercial crime and financial institution risk?

Losses resulting from crime or dishonesty can be very large.

When a surety extends a line of credit for future jobs, the surety

Must monitor the credit line by periodically analyzing the work in progress.

Which one of the following correctly indicates whether direct or indirect losses are excluded under the general exclusions of the Insurance Services Office, Inc. Commercial Crime Coverage Form?

Only indirect losses are excluded under the Commercial Crime Coverage Form.

Which one of the following correctly indicates the insuring agreements that are required components of Financial Institution Bond Form 24?

Only insuring agreements A, B, C, and F are required components of Form 24.

Mark was a programmer at a software design company. He stole one of the company's computers that included a client list and software designs. Which one of the following correctly describes the stolen item or items that are covered under the company's Employee Theft insuring agreement of the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

Only the computer is covered.

Which one of the following correctly identifies important information underwriters of financial institution bonds can obtain from the institution's business plan?

Openings and closings of locations

Which one of the following is correct about coverage under the Insurance Services Office, Inc. (ISO) commercial crime program and financial institution bonds?

Organizations eligible for financial institution bonds are not eligible for the ISO commercial crime program.

Which one of the following correctly describes the major reason why underwriters should carefully scrutinize operating managers with major ownership interests when evaluating a corporation for employee dishonesty coverage?

People with executive management responsibility have the greatest opportunity to steal.

Which one of the following correctly describes four common forms of business ownership?

Sole proprietorship, partnership, corporation, and joint venture

The simplest form of business is a

Sole proprietorship.

A corporation is a form of business created by

Statute.

Which one of the following is correct regarding the types of insureds covered by the Insurance Services Office, Inc. (ISO) commercial crime program?

The ISO commercial crime program is designed to insure any type of organization except financial institutions.

The primary tool for the underwriter in evaluating crime and financial institution risks is

The application.

Which one of the following is correct regarding the definition of "employee" in the Surety & Fidelity Association of America's Financial Institution Bond Form 24 compared with that in standard commercial crime forms?

The definition of "employee" is broader in Financial Institution Bond Form 24 than in standard commercial crime forms.

Which one of the following is correct regarding the definition of "theft" in the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form's?

The definition of "theft" requires the unlawful taking of money, securities, or other property and does not require notifying the police.

Which one of the following is correct regarding the importance of the economic environment to underwriters of financial institution bonds?

The economic environment is important because economic changes can affect a financial institution's success.

Which one of the following is correct regarding an exclusion for inventory shortages under the Computer and Funds Transfer Fraud insuring agreement?

The exclusion for inventory shortages under the Computer and Funds Transfer Fraud insuring agreement eliminates the wording in the general exclusion that permits the insured to use inventory records.

Which one of the following is correct regarding the named insured under the contract for commercial crime or financial institution insurance?

The first named insured has specific responsibilities to act for itself and on behalf of every other insured.

Which one of the following is correct regarding coverage for dishonest or fraudulent acts by an employee under insuring agreement A of Financial Institution Bond Form 24?

The insuring agreement requires that the employee act with the purpose of causing the insured to sustain a loss for coverage to apply.

A bank president committed a dishonest act by approving a loan that had been denied by the loan committee and that was against the bank board's policies. The president knew the person taking out the loan and felt confident the person would repay it. Would approval of this loan be covered under employee dishonesty coverage?

The loan approval would not be covered because there was no intent to cause a loss to the bank.

Which one of the following correctly describes the manifest intent requirement in employee dishonesty forms?

The manifest intent requirement states that the dishonest employee must intend to cause a loss to the insured and obtain a financial benefit.

Which one of the following losses is covered under the Outside the Premises insuring agreement of the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

The named insured asks her husband to take the daily receipts to the bank, and he is robbed.

Which one of the following is correct regarding rating employees for commercial crime and financial institution coverage?

The number and classification of employees are both important rating factors

Which one of the following is correct regarding locations as a rating factor for commercial crime or financial institution coverage?

The number of full-service, limited-use, or specific-use locations is an important rating factor.

Which one of the following is correct regarding a surety underwriter's evaluation of an application for a contract bond?

The underwriter needs to evaluate the contractor and the underlying contract.

If a federal contract requires that the general contractor subcontract a portion of work to a minority contractor or supplier, how should the surety underwriter respond?

The underwriter should ask whether a minority contractor or supplier is available.

If a family member, as owner-officer of a closely held corporation, performs all the financial record keeping, what should the underwriter do when considering the corporation's application for employee dishonesty coverage?

The underwriter should exclude the family member who performs financial record keeping from coverage.

If an employee stole financial records from his employer to cause a loss, which one of the following is correct regarding coverage under employee theft coverage?

There would be coverage because the employee intended to cause a loss to his employer.

Which one of the following correctly indicates whether coverage would exist under employee theft coverage if an employee dishonestly took normal employee benefits?

There would be coverage because there is no exclusion for employee benefits under employee theft coverage.

A fire destroyed a financial institution's computers and furniture, a portion of the building, and securities stored in a safe. Which one of the following correctly describes coverage under the Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form?

There would be coverage only for the securities stored in a safe.

An organization experiences a data breach, and customer credit card information is lost. It costs the organization $500,000 to repair the breach and $1,000,000 to notify customers and restore any losses on their credit cards. Which one of the following correctly describes coverage for this event under the Commercial Crime Coverage Form?

There would be no coverage for any of the losses associated with this event under the Commercial Crime Coverage Form.

Which one of the following is correct regarding coverage under an employee dishonesty form for an employee's dishonestly taking a normal employee benefit?

There would not be coverage because employee benefits earned in the normal course of employment are not covered.

An employee who is angry with his manager shreds a pile of checks deposited by customers. Would there be coverage for this act under an employee dishonesty form?

There would not be coverage because the employee did not obtain a financial benefit.

Marsha forgot to report her overtime in October and then reported it in November. This was discovered as an error on an audit at the end of the year. Which one of the following correctly describes coverage for this act?

There would not be coverage under either an employee dishonesty form or an employee theft form.

Don is a manager at a bank with authority to revise payroll. Don increases his salary by $500 per week without required authorization. Which one of the following correctly describes coverage for this act?

This act would be covered under an employee theft form but not an employee dishonesty form.

Which one of the following correctly describes the Excess Bank Employee Dishonesty Bond?

This bond is available only to commercial banks to increase the limit of coverage only for the Fidelity coverage agreement.

Which one of the following is correct regarding crime coverage for financial institutions?

This coverage must be provided on a special coverage form for financial institutions.

Which one of the following is correct regarding the Acts Committed by You, Your Partners or Your members exclusion to the Insurance Services Office, Inc. Commercial Crime Coverage Form?

This exclusion applies if the insured, partner, or member acted on his or her own or in collusion with another person.

Which one of the following is correct regarding the Acts Committed by Your Employees, Managers, Directors, Trustees or Representatives exclusion to the Insurance Services Office, Inc. Commercial Crime Coverage Form?

This exclusion applies to all the insuring agreements of the coverage form except the Employee Theft insuring agreement.

Which one of the following exclusions in the Insurance Services Office, Inc. Commercial Theft Coverage Form applies only to the inside and outside the premises insuring agreements?

Transfer or Surrender of Property

Which one of the following is correct regarding underwriters' evaluation of financial institutions' corporate cultures?

Underwriters consider financial institutions' corporate cultures to be significant because they reflect ethical standards.

Which one of the following is correct regarding hold-harmless agreements in contracts?

Underwriters must screen hold-harmless agreements and may insist on their removal.

Which one of the following is correct regarding the information underwriters need for evaluating employee dishonesty coverage for large corporations?

Underwriters need more information than for other businesses when evaluating large corporations for employee dishonesty coverage.

Which one of the following is correct regarding underwriters' preference for relationships with financial institutions?

Underwriters prefer long-term relationships with financial institutions.

Which one of the following is correct regarding a maintenance clause in a contract?

Underwriters should be aware of every maintenance clause.

Which one of the following is correct regarding underwriting employee dishonesty coverage for professional corporations?

Underwriters should pay special attention to the internal controls for professional corporations.

Which one of the following is correct regarding the significance of a sole proprietorship or a partnership in relation to underwriting employee theft or dishonesty?

Whether an applicant is a sole proprietorship or a partnership influences employee theft or dishonesty underwriting.

The Insurance Services Office, Inc. (ISO) Commercial Crime Coverage Form defines an "employee" as a natural person

Who is currently employed by the insured or was employed by the insured within the past thirty days.