CAS2 Online Course Quiz

In negligence, judges and juries must weigh presumptions, facts, and the common law in order to determine the correct outcome to a particular case. Which one of the following best describes how a court will usually deal with a case when the facts are undisputed and point to only one presumption? Choose one answer. A. The court must decide whether, as a matter of law, negligence occurred. B. The court must make findings of fact to determine whether negligence occurred. C. When the facts are undisputed, the court will always dismiss the case. D. When the facts point to only one presumption, the court must make findings of law to determine which party committed negligence per se.

13.11 A

The insuring agreement often contains policy provisions regarding the a. Covered causes of loss. b. Conditions of coverage. c. Covered policy period. d. Duties of the insurer and insured.

A

An endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period is referred to as a(n) Choose one answer. A. Peak Season Limit of Insurance endorsement. B. Value Reporting Form. C. Fluctuating Personal Property Valuation endorsement. D. Adjustable Limit of Insurance endorsement.

A B Incorrect. A Peak Season Limit of Insurance endorsement covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period.

Harry has a Personal Auto Policy (PAP) with liability limits of 100/$300/$50 and medical payments limits of $5,000 insuring his SUV. Harry also has other than collision and collision coverages with deductibles of $250 and $500, respectively. The local taxicab drivers are on strike and Harry decides to capitalize on the situation by transporting persons in his SUV for a fee. While transporting a businessman, Harry loses control of his SUV and hits a parked car. The damages are as follows: •Harry's medical costs $2,000 •The businessman's medical costs $1,000 •Damage to the parked car $14,000 •Damage to Harry's car $12,000 How much, if any, will Harry's PAP insurer pay for damages under Part A—Liability Coverage? Choose one answer. A. $0 B. $14,000 C. $17,000 D. $29,000

A B Incorrect. Harry's PAP insurer will pay $0 since this loss is excluded under the public or livery conveyance exclusion. Don't understand. SUV is Private Passenger Auto.. It is public conveyance because Harry charge a fee.

The most accurate definition of a rate is Choose one answer. A. The price per exposure unit for insurance coverage. B. An estimate of the expected value of future costs of an insurance coverage. C. The total of all actual costs of a risk transfer. D. A charge for insurance which is not inadequate, excessive, and unfairly discriminatory.

A B Incorrect. The most accurate definition of a rate is the price per exposure unit for insurance coverage.

Which one of the following is correct with respect to the Transfer of Rights of Recovery Against Others to Us condition of the Commercial Property Conditions Form? Choose one answer. A. Waiver of recovery against any other party may be given by the insured, provided the waiver is made in writing before the loss occurs. B. Waiver of recovery against any other party may be given by the insured before or after the loss, provided the waiver is made in writing. C. Any waiver given by the insured, either before or after the loss, impairs the insured's right to collect from the insurer for the loss. D. The insured is prohibited from waiving recovery against any other party.

A B Incorrect. Waiver of recovery against any other party may be given by the insured, provided the waiver is made in writing before the loss occurs.

People who do not regularly own an auto or who occasionally drive another person's vehicle or a rental vehicle can secure coverage for the loss exposures arising out of their use of nonowned auto by purchasing a Personal Auto Policy (PAP) with the Choose one answer. A. Named Non-Owner Coverage endorsement. B. Extended Non-Owned Coverage—Vehicles Furnished or Available for Regular Use endorsement. C. Miscellaneous Type Vehicle endorsement. D. Auto Loan/Lease Coverage endorsement.

A B. Incorrect. People who do not regularly own an auto or who occasionally drive another person's vehicle or a rental vehicle can secure coverage for the loss exposures arising out of their use of nonowned auto by purchasing a Personal Auto Policy (PAP) with the named Non-Owner Coverage endorsement.

Amy used the valet parking services at her local mall. Her car was damaged while in the custody of the valet service. Amy had a Personal Auto Policy (PAP) which provided physical damage coverage for the cause of loss. The No Benefit to Bailee provision in the policy Choose one answer. A. Preserves the right of Amy's insurer to recover from the valet service any amount it pays to Amy if the valet service was negligent. B. Provides that Amy's insurance is excess over the valet service's insurance. C. Allows the insurer to withhold payment to Amy until it is determined who was negligent. D. Allows Amy's insurer to pay only its proportionate share of the loss once negligence has been established.

A B. Incorrect. The No Benefit to Bailee provision in the policy preserves the right of Amy's insurer to recover from the valet service any amount it pays to Amy if the valet service was negligent.

The human resources vice president of LZ Corporation (LZ) informed Barbara, a new employee, that she must wait sixty days to enroll in the company health insurance plan. The advice was incorrect, and Barbara was unable to obtain employer-sponsored health insurance until the next open enrollment period nine months later. Barbara sues LZ for the extra cost to purchase private health insurance for the nine-month period. Which one of the following types of insurance would cover LZ for this claim? Choose one answer. A. Employee benefits liability B. Employers liability C. Employment practices liability D. Employee indemnification liability

A C Incorrect. LZ needs employee benefits liability insurance.

Which one of the following describes a difference between battery and assault? Choose one answer. A. Physical contact is required for battery but it is not required for assault. B. Fear of bodily harm is required for battery but not assault. C. The person needs to be conscious with battery but not with assault. D. Battery is an intentional tort and assault is not.

A C Incorrect. Physical contact is required for battery but it is not required for assault.

The medical payments coverage in the Personal Auto Policy (PAP) applies to Choose one answer. A. Any person occupying a covered auto. B. Any insured who is also covered by workers compensation for the same accident. C. Anyone injured in an accident involving an insured. D. Anyone occupying a car not owned by any insured but driven by an insured.

A C. Incorrect. Medical payments coverage applies regardless of fault to the named insured and defined family members, plus any other person while occupying a covered vehicle. Injuries occurring during employment are excluded from medical payments coverage if workers compensation benefits are required or available.

Which one of the following statements is true regarding "aircraft liability" coverage under the HO-3—Special Form (HO-3)? Choose one answer. A. The homeowners policy excludes all aircraft liability. B. Model airplanes that do not carry people or cargo are considered to be "aircraft" in the HO-3 policy. C. Hobby aircraft that do not carry people or cargo are considered to be "aircraft" in the HO-3 policy. D. If the insured flies her radio-controlled model airplane through a neighbor's picture window, the resulting liability claim would not be covered.

A D Incorrect. The homeowners policy excludes all aircraft liability. Model airplanes or hobby aircraft that do not carry people or cargo are excluded in the policy's aircraft definition, however, and therefore are covered.

An uninsured motor vehicle under the Personal Auto Policy (PAP) can mean a land motor vehicle or trailer of any type that meets any of the following criteria, EXCEPT: Choose one answer. A. It is insured by an insurer incorporated in a state that is different from the state where the accident occurred. B. No bodily injury insurance or bond applies to it at the time of an accident. C. It is a hit-and-run vehicle whose operator cannot be identified and it hits the named insured's covered auto. D. A bodily injury liability policy applies to it at the time of an accident but the insurance company becomes insolvent.

A D. Incorrect. All of the answer choices contain appropriate criteria, except that the state where its carrier is incorporated is not a criterion.

One of the effects of the Personal Injury Coverage endorsement on an HO-3—Special Form (HO-3) is to Choose one answer. A. Add the definition of personal injury. B. Add definitions for bodily injury and property damage. C. Add liability coverage for medical payments. D. Add liability coverage for bodily injury.

A D Incorrect. The endorsement expands the liability coverage by adding the definition of personal injury and then adding coverage for personal injury.

ISO and NCCI have developed endorsements to help insurers comply with the provisions of the Terrorism Risk Insurance Act (TRIA). Which one of the following statements about workers compensation endorsements created to implement TRIA is most accurate? Choose one answer. A. Unlike the disclosure endorsements developed by ISO for other lines of business, the NCCI disclosure endorsement includes acts of war among the losses that would be covered by workers compensation insurance under TRIA. B. Although workers compensation is one of the lines covered by TRIA, the catastrophic nature of workers compensation losses are such that insurers are allowed to exclude or limit workers compensation insurance coverage for terrorist acts as long as they disclose that in a policy endorsement. C. The purpose of the workers compensation self-insurance awareness certification endorsement developed by the NCCI is to allow policyholders to voluntarily self-insure the first $100,000 of covered workers compensation claims under TRIA for a reduced premium. D. Because workers compensation is a mandatory coverage governed by the individual state laws, the TRIA coverage for workers compensation insurance differs by state, so the NCCI disclosure endorsement is used to identify the applicable limits on a state-by-state basis.

A 12.36 C Incorrect. Unlike the disclosure endorsements developed by ISO for other lines of business, the NCCI disclosure endorsement includes acts of war among the losses that would be covered by workers compensation insurance under TRIA.

Which one of the following statements is correct with respect to the Building and Personal Property (BPP) Coverage Form? Choose one answer. A. The BPP lists several types of classes of property that do not qualify as covered property. B. The BPP must be written to provide coverage for all of the following: buildings, business personal property, and personal property of others. C. The BPP provides coverage against both direct and indirect loss or damage caused by a covered cause of loss. D. The BPP covers business personal property and property of others up to a specified percentage of the building coverage limit.

A Correct. The BPP lists several types of classes of property that do not qualify as covered property. C, Not Sure. But it is wrong.

The each occurrence limit in the Commercial General Liability (CGL) Coverage Form is the most the insurer will pay for the sum of which one of the following arising out of a single occurrence? Choose one answer. A. Bodily injury and property damage liability under Coverage A and medical expenses under Coverage C B. Personal and advertising injury and damage to premises rented to you C. Bodily injury and property damage liability under Coverage A and personal and advertising injury D. Products-completed operations liability and medical expenses under Coverage C

A Correct. The limit applies only to Coverages A and C.

Under which one of the following types of insurance policies are the insurer's payments for defense costs and supplemental payments typically applied to reduce the policy limits? Choose one answer. A. Pollution liability B. Commercial auto C. Homeowners D. CGL

A Correct. Under D&O, pollution liability and other specialty insurance policies, the insurer's payments for defense costs and supplemental payments are typically applied to reduce the policy limits. For common policies: HO, PA and CA, Business owners and CGL, defense cost do not reduce the policy limits. But once the limit payout for a claim, the duty to defend and pay ends.

The Commercial General Liability (CGL) policy provides that the insurer may, at its discretion, settle any claim or suit. In contrast, professional liability and management liability policies typically have what is referred to as a "hammer clause." This clause is invoked when the insured does not agree to a proposed settlement. The hammer clause has the effect of doing which one of the following? Choose one answer. A. Compelling the insured to agree to the settlement proposed by the insurer B. Forcing the insurer to make a subsequent settlement offer within 60 days of the initial offer C. Mandating settlement within 180 days of triggering the hammer clause D. Requiring the insured to submit the claim to arbitration procedures

A Page 12.11 C Incorrect. In professional liability policies, the hammer clause compels the insured to agree to the settlement proposed by the insurer.

Which one of the following statements is correct with respect to the Valuation condition of the Building and Personal Property Coverage Form (BPP)? a. Subject to certain exceptions, insured property is valued at its actual cash value (ACV). b. The valuation condition cannot be modified. c. Stock sold but not delivered is valued at replacement cost. d. Improvements and betterments that are not replaced are covered for up to $2,500.

A Page 9.6 Improvement and betterments are part of your BPP (contents) Personal Property of Others is limited to 2500, but not your BPP.

Omega Holdings owns a building with an actual cash value of $200,000. The property is insured under a Building and Personal Property Coverage Form (BPP) with a building limit of $140,000, an 80 percent coinsurance clause, and a $1,000 deductible. The policy includes a Causes of Loss—Broad Form covering the building. The building suffers $80,000 in fire damage. Which one of the following amounts will Omega's insurer pay? Choose one answer. A. $69,000 B. $70,000 C. $79,000 D. $80,000

A is correct. Forgot about the deductible B Incorrect. The $80,000 loss is multiplied by the limit ($140,000) and divided by the amount the building should have been insured for ($200,000 X 80%), all minus the $1,000 deductible.

Marta insured her home with an HO-3—Special Form (HO-3) that includes a Personal Property Replacement Cost Loss Settlement endorsement. Her large screen television fell off the wall and was damaged beyond repair. She had paid $2,000 for it. At the time of loss it had an actual cash value of $800 and a replacement cost of $1,500. Because she found that she had little time to watch television, she decided not to replace the TV. How much did her insurer pay on the claim? Choose one answer. A. $0 B. $800 C. $1,500 D. $2,000

A, C Incorrect. The insurer will pay $0 since falling off the wall is not a covered peril.

Insurers charge an initial deposit premium on a policy when Choose one answer. A. The policy is formally agreed to before all contract details have been finalized. B. The policy is not subject to adjustment. C. An estimate of the ultimate premium is readily available. D. The policy is endorsed mid-term.

A.

Management accounting frameworks are usually based on modified versions of generally accepted accounting principles and Choose one answer. A. Regulatory accounting rules. B. Tax accounting rules. C. Statutory accounting rules. D. Going-concern accounting rules

A. C is Incorrect. Management accounting frameworks are usually based on modified versions of generally accepted accounting principles and regulatory accounting rules.

To meet the needs of firms with foreign loss exposures, some insurers offer a variety of specialized coverages, including all of the following, EXCEPT: Choose one answer. A. Foreign pollution liability B. Foreign property and business income C. Foreign crime D. Foreign supplemental and excess auto

A. D Incorrect. To meet the needs of firms with foreign loss exposures, some insurers offer a variety of specialized coverages, including all that are listed, EXCEPT foreign pollution liability.

Under which one of the following provisions of the Building and Personal Property Coverage Form (BPP) is the maximum payment $10,000 or five percent of the building limit, whichever is less? Choose one answer. A. Increased Cost of Construction additional coverage B. Debris Removal additional coverage C. Outdoor Property coverage extension D. Pollutant Cleanup and Removal additional coverage

A. D. Incorrect. The maximum payment under the Increased Cost of Construction additional coverage is $10,000 or five percent of the building limit, whichever is less.

With respect to a vehicle used as a temporary substitute for the insured's covered auto, medical payments coverage under a Personal Auto Policy (PAP) Choose one answer. A. Is excess over other collectible auto insurance that pays medical expenses. B. Is primary for medical and funeral expenses. C. Is shared on a pro rata basis. D. Are specifically excluded from coverage.

A. B. Incorrect. With respect to a nonowned vehicle or a vehicle while used as a temporary substitute for the insured's covered auto, medical payments coverage under a PAP is excess over any other collectible auto insurance that pays medical or funeral expenses.

Len purchased a lawn roller and once he put it together and filled it with water he learned that the water leaked out during use. The gasket was not a proper fit and the store or manufacturer would not refund his purchase price or attempt to resolve the issue. Len's best basis for a lawsuit is which one of the following? Choose one answer. A. Implied warranty of merchantability B. Negligence C. Failure to warn D. False advertising

A. B Incorrect. Implied warranty of merchantability is a better basis for a products liability lawsuit than is negligence, failure to warn or false advertising.

Neil owns a 50-acre farm with a creek running through it. Neil decided to dam the creek to irrigate from it which resulted in downstream wells drying up. When a neighbor sued Neil the court found that Neil had committed a wrongful reckless act with a motive to harm showing a disregard for social obligation. Neil's actions are best described as Choose one answer. A. Outrageous conduct. B. Gross and wanton negligence. C. Fraudulent actions. D. Material misrepresentations.

A. B Incorrect. Neil did not misrepresent his action or attempt to deceive or defraud anyone. This is not an act of negligence but it is outrageous conduct on Neil's part.

Which one of the following is an exclusion unique to the Causes of Loss—Special Form? Choose one answer. A. Smog B. War C. Rupture or bursting of water pipes D. Mudslide or mudflow

A. B Incorrect. Smog is specifically excluded from the Causes of Loss—Special Form.

Sally insures her house with an unendorsed HO-3—Special Form (HO-3) with a Coverage A—Dwelling limit of $275,000, which is the replacement cost of the house. A fire destroys the house including a collection of blueprints belonging to Sally's employer, valued at $10,000. Sally was storing the blueprints at her home while her office was changing locations. Assuming no deductible applies, how much, if any, will Sally's HO-3 insurer pay to replace the blueprints? Choose one answer. A. $0 B. $1,500 C. $2,500 D. $10,000

A. B. Incorrect. Sally's insurer will pay nothing since business data are excluded.

Which one of the following best describes what is included in a loss payment under the Auto Loan/Lease Coverage endorsement to the Personal Auto Policy (PAP)? Choose one answer. A. The balance of the loan or lease amount for the vehicle B. Penalties imposed under a lease C. Balances transferred from previous loans or leases D. Overdue lease or loan payments

A. C Incorrect. The balance of the loan or lease amount for the vehicle.

Collision coverage under the Personal Auto Policy (PAP) Choose one answer. A. Applies to damage to a parked insured vehicle resulting from a passenger in another parked vehicle opening its door. B. Applies only to damage to a vehicle for which the owner of the vehicle is responsible. C. Applies to damage to a vehicle resulting from explosion or earthquake. D. Is less expensive than other than collision (OTC) coverage.

A. C. Incorrect. Collision coverage under the Personal Auto Policy (PAP) applies to damage to a parked insured vehicle resulting from a passenger in another parked vehicle opening its door.

Brenda wrote a poem that she sent to her sister who sold the poem to a recording company. Learning of the sale, Brenda became upset. If Brenda has an insurable interest in the poem she wrote as a type of "property," the legal basis of her insurable interest arises out of Choose one answer. A. Ownership interest in property. B. Contractual obligations. C. Factual expectancy. D. Representation of another party.

A. C. Incorrect. Ownership interest in property.

In terms of general categories, remedies can be either equitable or Choose one answer. A. Legal. B. Commercial. C. Prospective. D. Supervisory.

A. C. Incorrect. Remedies can be either legal or equitable.

Which one of the following are examples of trade libel? Choose one answer. A. False statements denying the plaintiff's title to the property B. False statements regarding the plaintiff's advertising reputation C. False statements concerning the product's reputation D. False statements concerning the quantity of the plaintiff's packaging

A. CIncorrect. An example of trade libel or product disparagement includes false statements denying the plaintiff's title to property.

Fancy Dress Shop is a small specialty clothing boutique for women. Liability claims against Fancy Dress Shop would most likely arise from its Choose one answer. A. Premises and operations exposure. B. Workers compensation exposure. C. Advertising exposure. D. Products and completed operations exposure.

A. D Incorrect. Liability for Fancy Dress Shop would most likely arise from its premises and operations exposure.

Which one of the following statements is correct with regard to Loss Payment of the Building and Personal Property Coverage Form (BPP)? Choose one answer. A. The condition states that regardless of the value of the loss, the insurer will pay no more than the insured's financial interest in the covered property. B. Insurers preferred settlement option is to repair, rebuild, or replace the damaged property with other property of like kind and quality because it keeps loss settlement costs down. C. The Loss Payment condition states that the insurer will pay the cost of repairing or replacing the damaged property, including any increased cost attributable to enforcement of ordinances or laws regulating the construction, use, or repair of the property. D. The insurer has 90 days after receiving a satisfactory proof of loss to notify the insured of its intent to either pay a claim or deny payment.

A. D Incorrect. The time period is 30 days. Page 9.5

A disability income policy has a rider that increases the monthly benefit amount by 4 percent for each of the first five years the policy is in force, if benefits have not yet begun. This is an example of which one of the following types of riders? Choose one answer. A. Automatic increase B. Future increase option C. Guaranteed insurability D. Cost of living adjustment

A. D Incorrect. This is an example of an automatic increase rider. A cost of living adjustment rider increase benefit payments that are already being made.

Anthony, Bob, and Mary got into a violent argument and accidentally destroyed Anthony's valuable vase, worth $10,000. Anthony was 20 percent at fault, Bob was 10 percent at fault, and Mary was 70 percent at fault. They are not in a combined fault state. In a lawsuit where Anthony is the plaintiff and Bob and Mary are defendants, which one of the following statements is true? Choose one answer. A. Under the 49 percent rule, Mary would have to pay $8,000. B. Under the 50 percent rule, Bob and Mary would have to pay $4,000 each. C. Under the 50 percent rule, Bob and Mary would have to pay $10,000 total. D. Under the 49 percent rule, Mary would have to pay $7,000.

A. D Incorrect. Under the 49 percent rule, Mary would have to pay $8,000.

Jackie had been having trouble paying her bills and decided to get a second job as a taxi driver. She was involved in a collision with a van and her fare-paying passenger was injured. Jackie's car was insured with a Personal Auto Policy (PAP) that included medical payments coverage. Jackie's passenger Choose one answer. A. Will not receive medical payments under the PAP because of the Public or Livery Conveyance exclusion. B. Will receive medical payments under the PAP under the Public or Livery Conveyance coverage provision. C. Will not receive medical payments under the PAP because of the PAP's Omnibus clause. D. Will receive medical payments under the PAP as an innocent participant.

A. D's reason is incorrect. However, this is contradict to the case study example in the book. When the driver is driving her own car as Taxi, the passanger should be cover because the exclusions does not apply to private passenger auto.

Which one of the following best describes an accounting issue that arises for reinsurers from bordereaux? Choose one answer. A. Bordereaux frequently lack detail. B. Bordereaux are frequently not provided. C. Bordereaux are frequently inaccurate. D. Bordereaux frequently require input from multiple insurers.

A. D. Incorrect. Bordereaux frequently lack detail.

Customer Mary gave dry cleaner Ike her fur coat so he could remove a large stain. Ike could not eliminate the stain so he asked restoration specialist Peter to attempt to remove it. The bailor in this scenario is Choose one answer. A. Mary. B. Ike. C. Peter. D. Both Ike and Peter.

A. D. Incorrect. Mary. Bailor is the owner of the personal property in a bailment. Bailee is the party temporarily possessing the personal property in a bailment. But hotelier doesn't possess the personal property, so it is called exposure to legal liability.

One of the main factors used in developing a base premium for a homeowners policy is Choose one answer. A. The public protection class. B. The effect of endorsements on the premium. C. A change in the deductible from $500. D. The construction date.

A. Deductible changes is for base premium adjustment, not to determine base premium C. Incorrect. One of the main factors used in developing a base premium for a homeowners policy is the public protection class.

Which one of the following would be considered supplementary payments under liability insurance policies? Choose one answer. A. Cost of surety bonds B. Defense costs C. Claimant's compensable damages D. Judgments against the insured

A. Three types of supplementary payments: 1. cost of surety bonds 2. court costs taxed against the insured 3. interest on judgments C. Incorrect. Cost of surety bonds

Which one of the following statements is true regarding the agreed value method of property valuation used in some property insurance policies? Choose one answer. A. If a total loss occurs, the insurer will pay the agreed value specified in the policy. B. The agreed value method is useful in establishing precise values because it uses a specific formula. C. The agreed value method stipulates what the agreed value has to be relative to the true value of the property. D. The agreed value method in property insurance policies illustrates the principle of indemnity

A. Correct. If a total loss occurs, the insurer will pay the agreed value specified in the policy. The agreed value method is not a specific formula; used when difficult to calculate a precise value; and does not stipulate what the agreed value has to be relative to the true value of the property.

Which one of the following statements is correct with respect to Property Not Covered under the Building and Personal Property Coverage Form (BPP) Choose one answer. A. Only contraband or property in the course of illegal transportation or trade is totally uninsurable by endorsement or in other policies. B. ISO manual rules prohibit removing the exclusion of many of the items specified under Property Not Covered. C. By endorsement, insurance can be made available for any of the items listed in the Property Not Covered section. D. Almost all of the items listed in the Property Not Covered section are considered to be uninsurable.

A. Correct. Only contraband or property in the course of illegal transportation or trade is totally uninsurable by endorsement or in other policies.

While Wanda was mowing her lawn the lawn mower made a popping noise and suddenly exploded. Engine parts flew through the air and struck Wanda's grandfather in the eye. As a result of losing his vision, Wanda's grandfather, Homer, sued the lawnmower manufacturer. Homer's best approach in the lawsuit is to assert Choose one answer. A. Strict liability as a nonuser. B. Intentional negligence in the manufacture of the lawnmower. C. Imputed negligence using the foreseeability rule. D. Breach of warranty by the manufacturer.

A. Defect is strict liability. D Incorrect. Strict liability as a nonuser.

Which one of the following situations illustrates a professional liability loss exposure? Choose one answer. A. An insurance producer fails to properly advise a client on his or her insurance needs. B. An attorney serves on the board of a not-for-profit organization. C. A physician fails to maintain adequate lighting in the office parking lot. D. A foreman fails to install safety nets in a building under construction.

A. Page D Incorrect. A professional liability loss exposure arises when an insurance producer fails to properly advise a client on his or her insurance needs.

Under the bank deposit approach to deposit accounting Choose one answer. A. The initial deposit grows with interest credited at an interest rate whose calculation is determined in advance and declines with withdrawals. B. The deposit value will change with the amortization of interest and with a change in projected future losses. C. The deposit value and discount rate are subject to change whenever the projected cash flows since inception are changed. D. The ending deposit for a reporting period is dependent on the particular pattern of cash flows that led to the beginning balance.

A. Page 1.59

Which one of these widely accepted tort reform measures is intended to speed up the resolution of cases? Choose one answer. A. Pretrial screening panels B. Caps on damages C. Joint-and-several liability D. Statute of limitations

A. Page 14.30 D Incorrect. Pretrial screening panels are intended to speed up the resolution of cases.

Josh owns an auto service center. A customer dropped off a car for repair one morning and Josh agreed to drive the customer to the customer's office. Josh used his personal car insured by a Personal Auto Policy (PAP) to do this. While driving the customer to work, Josh got into an auto accident with another car in which the customer and the other driver were injured. Would Josh's PAP apply to this loss? Choose one answer. A. Yes, under an exception to the garage business use exclusion. B. No, because the garage business use exclusion would apply. C. No, because the event does not qualify as an accident under the insuring agreement. D. Yes, under an exception to the other business use exclusion.

A. Page 4.19 B. Incorrect. Yes, under an exception to the garage business use exclusion. The exclusion does not apply to the insured's covered auto when it is being driven by the named insured; a family member; or any other partner, agent, or employee of the named insured or a family member.

Defense costs coverage is included under Section II—Liability Coverages in the HO-3—Special Form (HO-3). This coverage Choose one answer. A. Is supplemental to the liability limit. B. Is included in the personal liability limit. C. Is excluded if the suit against the insured is groundless. D. Has a liability limit separate from the personal liability limit.

A. Page 7.4 B Incorrect. This Coverage is supplemental to the liability limit. (The insurer provides the defense costs in addition to any coverage for damages.)

Which one of the following statements is correct with respect to the Preservation of Property additional coverage of the Building and Personal Property Coverage Form (BPP)? Choose one answer. A. It protects against "any direct physical loss or damage" and is not limited to either the covered causes of loss or locations stipulated in the coverage form. B. The protection provided under this additional coverage is over and above the limits of insurance stated in the declarations. C. It does not provide protection while the property is in transit to the new location. D. It extends the policy to protect covered property for up to 180 days at the new location.

A. Page 8.13 B Incorrect. It is subject to the limits of insurance specified in the declarations.

Under the Building and Personal Property Coverage Form (BPP), which one of the following extensions covers loss only by fire, lightning, explosion, riot or civil commotion, and aircraft? Choose one answer. A. Outdoor Property B. Newly Acquired or Constructed Property C. Personal Effects and Property of Others D. Property Off-Premises ID: 5829384 | Points: 1

A. Page 8.16 B Incorrect. The Outdoor Property extension covers only loss by fire, lightning, explosion, riot or civil commotion, and aircraft.

Which one of the following statements is correct with respect to the Value Reporting Form? Choose one answer. A. It requires the insured to periodically report property values to the insurer. B. It provides insurance for the insured's average expected values. C. If the insured does not report values accurately and on time, the insurer has no obligation to pay any loss that occurs. D. It is used to insure fluctuating values of both buildings and business personal property.

A. Page 9.20 D Incorrect. It is used only for business personal property (contents).

Dane has an unendorsed HO-3—Special Form (HO-3) to insure his single-family home. He started a small Internet business. Dane publicizes stamp and coin dealers and their inventories over the Internet and keeps the web site inventories and values current for his customers. As a storm passed over, lightning struck Dane's house. Dane's computer was damaged, destroying half the records of his customers' inventories. He estimates that it will cost $2,000 to reestablish his inventory records. Disregarding any deductible that may apply, what amount, if any, will Dane's insurer pay for these losses? Choose one answer. A. $0 B. $500 C. $1,000 D. $2,000

A. Page: 6.15. Properties not covered: Business Data. D. Incorrect. Dane's insurer would pay nothing.

With insurance-to-value provisions under homeowners (HO) and businessowners (BOP) policies, the amount payable by the insurer will never be less than the Choose one answer. A. Actual cash value (ACV) of the damaged property, subject to policy limits. B. Repair cost of damaged property, subject to policy limits. C. Policy limits less the deductible. D. Replacement cost of the damaged property, subject to policy limits.

A: 3.13 B. Incorrect. With insurance-to-value provisions under homeowners (HO) and businessowners (BOP) policies, the amount payable by the insurer will never be less than the actual cash value (ACV) of the damaged property, subject to policy limits.

Josh has just built a large kennel in his backyard for his pet dogs. The kennel includes a heated shed and access to a large fenced area. Josh wants to make sure he has adequate insurance limits under his homeowners policy so that he can replace the kennel if it is damaged. Which one of the coverage limits should Josh check on his homeowners policy to determine whether his coverage on the kennel is adequate? a. Coverage A—Dwelling b. Coverage B—Other Structures c. Coverage C—Personal Property d. Coverage D—Loss of Use

B

Which one of the following best describes the purpose of rule hierarchies within accounting frameworks? Choose one answer. A. To determine which accounting framework should be used B. To resolve conflicts among rules that preparers of financial statements may encounter when applying those rules C. To resolve differences between the United States and the European Union D. To resolve differences between the accounting rules that apply to private versus publicly traded companies

B

When a defendant is liable under the dangerous instrumentality doctrine, which one of the following acts is the act that creates the liability? Choose one answer. A. The negligent act is the failure to exercise reasonable control and supervision over the dangerous instrumentality. B. The negligent act is the act of negligently permitting a child to obtain or use a dangerous instrumentality that harms a third party. C. The negligent act is the negligent use of the dangerous instrumentality by a third party, vicariously applied to the defendant. D. The negligent act is the use, control, and operation of any dangerous instrumentality by the defendant.

B A. Incorrect. The negligent act is the act of negligently permitting a child to obtain or use a dangerous instrumentality that harms a third party.

A product manufactured by a company has been making people ill and a number of the victims have filed a class-action lawsuit. Which one of the following sets of elements would the trial court consider to certify this as a class action suit? Choose one answer. A. Amount of damages, adequacy of representation, commonality, typicality B. Commonality, numerosity, adequacy of representation, typicality C. Adequacy of representation, numerosity, commonality, amount of damages D. Numerosity, commonality, typicality, amount of damages

B C Incorrect. Commonality, numerosity, adequacy of representation, typicality

Manufacturer Tyler was in the welding business. He was having financial problems and began to save money by "enhancing" the solder with an inferior product as well as thinning the welds. These practices led to defective welds resulting in bodily injury. In a negligence case against Tyler, a plaintiff must prove that Tyler Choose one answer. A. Intended harm. B. Failed to use reasonable care. C. Failed to warn of dangerous conditions. D. Materially misrepresented his product.

B C Incorrect. It is unlikely that Tyler intended any harm. Failure to warn of dangerous conditions is not the primary issue in a negligence lawsuit.

Which one of the following common policy conditions permits the insurer to verify property and business income values necessary for premium rating purposes? Choose one answer. A. Inspections and surveys B. Examination of books and records C. Changes condition D. Premiums

B D Incorrect. It is examination of book and records.

ISO has developed standard endorsements to help insurers comply with the provisions of the Terrorism Risk Insurance Act (TRIA). When a policyholder accepts certified acts of terrorism coverage, the ISOCommercial Lines Manual requires the insurer to attach a cap endorsement for the applicable coverages. The purpose of the cap endorsement is to Choose one answer. A. Limit the amount of additional premium that the insurer can assess in the event that it pays losses for a certified act of terrorism as defined under federal law. B. Identify the $100 billion cap on annual aggregate insured losses that can be paid by the federal government and to outline the limitations of the insurer's obligations under the law. C. Set the deductible on the policyholder's separate coverages that may be limited by the federal terrorism insurance program. D. Establish the portion of premium that the insurer is attributing to terrorism coverage and to identify the coverages to which those premiums apply.

B D Incorrect. The cap endorsement identifies the $100 billion cap on annual aggregate insured losses paid by the federal government and to outlines the limitations of the insurer's obligations under the law.

The Personal Auto Policy (PAP) provides physical damage coverage for a covered auto that is damaged when the car's driver loses control and overturns the car on a sharp curve. This coverage is called Choose one answer. A. Comprehensive coverage. B. Collision coverage. C. Other than collision coverage. D. Falling object coverage.

B overturn = upset = 侧翻 C Incorrect. Collision coverage includes the upset of a covered auto.

Which one of the following best describes "double indemnity" regarding a life insurance policy? Choose one answer. A. If two policies are issued on the same life, only one policy must pay in the event of death. B. The death benefit doubles if death is the result of an accident. C. Death as the result of suicide will pay no more than half the face value. D. The death benefit is doubled if death occurs in the first two years.

B Correct. "Double indemnity" refers to the accidental death benefit policy provision that doubles the face amount of insurance if the insured dies as a result of an accident.

After using the DICE method to determine whether the claim is covered, the insurer must determine the Choose one answer. A. Cause of loss. B. Amount payable. C. Conditions of coverage. D. Exclusions.

B Correct. After using the DICE method to determine whether the claim is covered, the insurer must determine the amount payable.

The HO-3—Special Form (HO-3) excludes coverage for liability assumed under contract or agreement. However, exceptions apply, provided the loss exposures do not involve coverage excluded elsewhere in the policy. Which one of the following describes an exception? Choose one answer. A. Agreements intending to injure a third party B. Written contracts relating to the ownership of an insured location C. Liability assumed after an accident occurs D. First-party liability

B Correct. Written contracts relating to the ownership, maintenance, or use of an insured location are exceptions to this exclusion.

Under an HO-3—Special Form (HO-3) policy, an insured who is moving from one principal residence to another will have Choose one answer. A. Half the limit of Coverage C available at each location for 30 days. B. The full limit of Coverage C available at both locations for 30 days. C. The full limit of Coverage C available at both locations for one year. D. No Coverage C limit available until the move is complete.

B Page 6.13 A. Incorrect. Under an HO-3 policy, an insured who is moving from one principal residence to another will have the full limit of *Coverage C* available at both locations for 30 days.

Which one of the following is a specific characteristic of relevant accounting information? Choose one answer. A. It is consistent. B. It is timely. C. It is comparable. D. It is widely disseminated

B is correct. C. Incorrect. A specific characteristic of relevant accounting information is that it is timely.

The effect of premium billing on the balance sheet or income statement is dependent upon when the premium is received. If the billed premium is received before the effective date of the policy Choose one answer. A. An asset account, called "premiums receivable" is established until the effective date. B. The amount of the premium is treated as a deposit liability until the effective date. C. The unearned premium is equivalent to the amount of the full premium at the time of payment. D. The written premium is equivalent to the amount of the full premium at the time of payment.

B is correct. Page 1.25 and the second single-policy example on page 1.27 Unsure. I selected C.

An insured has a Personal Auto Policy (PAP) that includes uninsured motorist (UM) coverage for his own car. The insured is injured while riding on a private tour bus that is hit by an at-fault uninsured motorist. Which one of the following statements is true? Choose one answer. A. The insured is not entitled to UM coverage because of the public or livery conveyance exclusion. B. The insured is entitled to UM coverage under his or her PAP. C. The insured is entitled to UM coverage from the bus company's policy but not from his own PAP. D. The insured is entitled to UM coverage under his PAP under the share-the-expense car pool exception.

B. A. Incorrect. Because the public or livery conveyance exclusion applies only to "your covered auto," the insured and family members would be covered for UM while occupying a public or livery conveyance that is not "your covered auto."

Which one of the following best describes the likely life insurance needs of a family with two working spouses and dependent children? Choose one answer. A. Life insurance on the spouse with the higher income B. Life insurance on both spouses C. Life insurance on both spouses and the children D. Life insurance on both spouses and school-age children

B. C Incorrect. Life insurance on both spouses

An income statement is structured to calculate an organization's Choose one answer. A. Assets as of a specific date. B. Profitability. C. Net worth. D. Sources and uses of funds.

B. C. Incorrect. This is the function of *Balance Sheet*. An income statement is structured to calculate an organization's profitability.

A plaintiff suing for trespass onto real property would have standing to sue only in the jurisdiction in which real property is located. This cause of action is known as Choose one answer. A. Procedural. B. Local. C. Transitory. D. Jurisdictional.

B. D Incorrect. This is known as a local cause of action, that is, one that can only be brought where the subject matter of the controversy is located.

Agent Amanda's client had a general liability claim denied because the insurance application misrepresented the true exposure the insurer was being asked to cover. Amanda's client filed suit against her since it was she who delivered the application to the insurer. Amanda's defense was that the information in the application was supplied by the client and she had no reason to doubt it. Amanda's defense is an example of a failure of the plaintiff to prove which one of the following elements in tort liability? Choose one answer. A. The existence of a legal duty B. A breach of a legal duty C. Proximate causation D. Actual injury or damage

B. A Incorrect. Amanda's defense is an example of a failure of the plaintiff to prove a breach of a legal duty.

The Separation of Insureds condition states that the insurance provided by the policy applies in which one of the following ways? Choose one answer. A. As a separate limits to separate insureds B. Separately to each person insured C. To all limits of coverage to all persons insured under the policy D. According to the order set forth in the policy declaration for each insured

B. C Incorrect. The Separation of Insureds condition states that the insurance provided by the policy applies separately to each insured person.

Bob visits the town square on New Year's Eve for a celebration. While there, a scuffle occurs causing the crowd to surge forward. Bob is accidentally knocked down by Jim and suffers an injury to his arm. Soon after, a police officer who is responding to the initial incident runs into and knocks Bob down, causing an injury to his knee. Does Bob have grounds for bringing action against Jim and the police officer for battery? Choose one answer. A. No, because Jim can assert the defense of consent and the police officer can assert the defense of physical discipline. B. No, because the contacts by both Jim and the police officer were accidental and not intended to be hostile or offensive. C. Yes, because both Jim and the police officer did not exercise reasonable care in preventing injury to others by their actions. D. Yes, because the bodily contact by both Jim and the police officer was more than "incidental" and resulted in actual bodily harm.

B. A Incorrect. No, because the contacts by both Jim and the police officer were accidental and not intended to be hostile or offensive.

Which one of the following is a defense of the right to privacy? Choose one answer. A. Plaintiff has never published the information B. The publication would not offend an individual of ordinary sensibility C. Plaintiff did not consent to publication D. Matters were disclosed in private

B. A Incorrect. The publication would not offend an individual of ordinary sensibility and the plaintiff has suffered no damages and no actionable invasion of privacy.

Anne and Dave insure their house with an unendorsed HO-3—Special Form (HO-3) with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A thief breaks into the house while Anne and Dave are on vacation and steals the following items: Jewelry $5,000 Sterling silver $4,700 Ignoring any deductible that may apply, how much will Anne and Dave's insurer pay for the loss of the items? Choose one answer. A. $3,000 B. $4,000 C. $5,000 D. $9,700

B. A. Incorrect. The insurer will pay $1,500 for the jewelry and $2,500 for the sterling silver.

An owner of a car insured with a Personal Auto Policy (PAP) for which an insured selected and paid a premium for medical payments coverage Choose one answer. A. Would be eligible for medical payments under the PAP if injured while occupying a motorcycle on a public highway. B. Would not be eligible for medical payments under the PAP if injured while occupying a motorcycle on a public highway. C. Would be eligible for medical payments under the PAP if injured while occupying a motorcycle on the insured's own property. D. Would not be eligible for medical payments under the PAP if injured while driving a motorcycle but would be eligible for such coverage while riding as a passenger on a motorcycle.

B. C Incorrect. A medical payments coverage exclusion applies if the insured is injured while occupying a motorized vehicle with *fewer than four wheels.*

Which one of the following is an action causing harm that would most likely result in the application of the res ipsa loquitur doctrine? Choose one answer. A. A drunk driver runs his car into a pedestrian. B. A roll of tar paper falls off a building at night and hits someone. C. An arson fire burns a warehouse to the ground. D. A tornado destroys a barn

B. C Incorrect. A roll of tar paper falls off a building at night and hits someone.

Many insurers have developed their own company-specific preprinted forms, especially for coverages in which the insurer specializes, or for a. Niche market exposures. b. Catastrophic loss exposures. c. High-volume lines of insurance. d. Infrequently used coverage needs.

C.

While driving the family car, nineteen-year-old Susan hit a pedestrian, causing severe injuries to the pedestrian. The uninsured pedestrian sued Susan's parents for damages. The liability concept or doctrine that most applies to this situation is which one of the following? Choose one answer. A. Absolute liability B. The family purpose doctrine C. Tortfeasor's capacity D. Alternative liability

B. C Incorrect. The family purpose doctrine involves the use of a family car. Under this doctrine, a parent who keeps an automobile for the family's use is liable for the torts a family member commits while using the automobile.

Which one of the following is a major type of commercial speech that might be defamatory? Choose one answer. A. Direct product comparison B. Comparative advertising C. Commercial speech defamation D. Product differentiation

B. C Incorrect. The major types of commercial speech that might be defamatory are comparative advertising and product disparagement.

Kevin recently purchased a long-term disability income policy. The policy states that he can renew the coverage until age 65 as long as he is gainfully employed. However, the insurer reserves the right to raise the premium at renewal. This policy is considered Choose one answer. A. Optionally renewable. B. Guaranteed renewable. C. Conditionally renewable. D. Noncancelable.

B. C. Incorrect. A policy that the insurer agrees to renew, but for which the premium can be raised is an example of a guaranteed renewable policy.

Reform proponents seek to eliminate which one of these court measures because it can have the effect of reducing potential liability of a defendant by reducing the amount of damages the defendant owes? Choose one answer. A. Joint-and-several liability B. Collateral-source rule C. Statutes of limitations D. Structured settlements

B. D Incorrect. A rule of evidence, the collateral-source rule, bars the introduction of evidence that a plaintiff has other sources of recovery; thus, the defendant remains responsible for all damages, even those covered by insurance.

If law enforcement officials seize an insured's personal computer to search for files that might be related to a crime, the insured under an HO-3—Special Form (HO-3) may be unsuccessful in claiming a theft loss on the computer due to the Choose one answer. A. Intentional Loss exclusion. B. Governmental Action exclusion. C. Ordinance or Law exclusion. D. Personal Computer exclusion.

B. C Incorrect. Under an HO-3 policy the insured may be unsuccessful in claiming a theft loss on the computer due to the Governmental Action exclusion. Ordinance or Law exclusion eliminates law that reduces that value of the property ordinance or law exclusion An exclusion found in most standard property coverage forms that clarifies that there is no coverage for loss or damage that occurs as a direct result of the enforcement of any law or ordinance regarding construction, use, or repair of property. Nor does it cover any property that has to be torn down as required by ordinance or law, after a fire or other physical damage loss, even if that damage is a result of an otherwise covered cause of loss.

Jack and Susan own and manage a hotel. They are concerned about their responsibility for the property of their guests and whether they have an insurable interest in that property and thus could buy insurance to cover their responsibility. Most courts would hold that they do have an insurable interest in the guests' property based on which one of the following legal bases? Choose one answer. A. Factual expectancy. B. Exposure to legal liability. C. Contractual obligations. D. Representation of another party.

B. C. Incorrect. Exposure to legal liability. Examples of exposure to legal liability: 1. hotelier -> guest's property 2. tenant -> premises 3. contractor -> building under construction Contractual obligations involve the creditor and debtor. The contract may regard people (unsecured creditor, who do not have an insurable interest) or people (interest in the debt's remaining balance).

Benjamin was a property owner, and Katie was his tenant. Every winter, the water from Benjamin's gutters and downspouts emptied onto his porch and froze solid, creating a dangerous sheet of ice that made his porch essentially useless. Benjamin rigged his gutters and downspouts to trickle the water down the side of his property, toward a road. The water froze, and created a nearly invisible sheet of ice on the road. Benjamin has created a Choose one answer. A. Hidden danger, and he has a duty to warn of the hazard, but Katie has no duty. B. Nuisance, and he can be liable for discharging water on the road, but Katie is not. C. Natural condition, and neither he nor Katie are liable for the flow of natural waters onto roads. D. Negligent artificial condition, but only Katie is liable, as the possessor of the land.

B. 13.22 under artificial conditions. A Incorrect. Benjamin has created a nuisance, and he can be liable for discharging water on the road, but Katie is not.

Another term for trade libel is Choose one answer. A. Product comparison. B. Product disparagement. C. Comparative advertising. D. Advertising defamation.

B. 13.30 D . Incorrect. Product disparagement or trade libel are intentionally false or misleading statements about the quality of the plaintiff's product resulting in financial damage to the plaintiff.

In property insurance, the determination of underinsurance (not insuring to value) is made Choose one answer. A. At the time of application. B. At the time of loss. C. At post loss by the underwriter. D. When the risk is assessed by the underwriter.

B. 3.14 C. Incorrect. In property insurance, the determination of underinsurance (not insuring to value) is made at the time of loss.

Which one of the following best describes a package modification factor? Choose one answer. A. The price per exposure unit for insurance coverage B. A factor that is applied to the regular policy premiums for certain coverage parts of a CPP, resulting in premium discounts for those coverage parts C. Any condition or situation that presents a possibility of loss, regardless of whether loss actually occurs D. A factor that is applied to the regular policy premiums for certain coverage parts of a CPP, to account for territorial differences

B. A factor that is applied to the regular policy premiums for certain coverage parts of a CPP, resulting in premium discounts for those coverage parts

Insurance policy regulation starts with legislative bodies. Which one of the following is one of the four areas of legislative policy regulation? Choose one answer. A. Market conduct B. Readability standards C. Rate regulation D. Rebate enforcement

B. Product regulation = policy regulation D Incorrect. Readability standards is one of the four areas of legislative policy regulation.

The Named Non-Owner Coverage endorsement of the Personal Auto Policy (PAP) automatically covers Choose one answer. A. All persons who drive the vehicle specified in the endorsement. B. Only a person who is named in the endorsement. C. Only a person who is named in the endorsement and the named insured's spouse. D. The named insured and all resident family members.

B. Both the Named and Extended cover only the named person D. Incorrect. The Named Non-Owner Coverage endorsement of the Personal Auto Policy (PAP) automatically covers only a person who is named in the endorsement.

Jerry who lives in a rural area has experienced several animal-related losses to his home. Which one of the following losses would be covered under Jerry's HO-3—Special Form (HO-3)? Choose one answer. A. A bird built a nest in the wall, causing damage to the drywall. B. A deer ran through Jerry's glass door and destroyed the door and other property. C. Jerry's cat brought in a squirrel that got away and later chewed electrical wiring, causing damage to Jerry's home. D. Jerry's dog chewed the leg of his coffee table, destroying the piece of furniture.

B. Correct. A deer ran through Jerry's glass door and destroyed the door and other property. Damages caused by pets/birds/rodents/incents/vermin are excluded.

Smith Construction Company is covered under an unendorsed Commercial General Liability (CGL) Coverage Form. While working at a job site, Smith ruptured a natural gas line causing a small fire to a neighboring retail store. The following claims have been made against Smith due to this occurrence. Fire damage to the neighboring store Pain and suffering claimed by the store owner Loss of income by the store owner until repairs are made to the store Fire damage to the backhoe owned by Smith Which one of the following statements is correct? Choose one answer. A. Fire damage is not covered by the CGL policy. B. The backhoe is property owned and is excluded. C. Pain and suffering does not meet the definition of bodily injury. D. Loss of income is not loss of tangible property.

B. Correct. The backhoe is property owned and is excluded.

Which one of the following homeowners policy additional coverages is NOT subject to a deductible? Choose one answer. A. Landlord's furnishings B. Fire department service charge C. Debris removal D. Loss assessment

B. Correct. The fire department service charge additional coverage is not subject to a deductible. They are crazy. But I have to get it perfect.

A typical factor to be considered in determining the amount and terms of a structured settlement or judgment is Choose one answer. A. The defendant's life expectancy. B. The cost of dependent's needs. C. The disproportioately large amount of taxes on such arrangements. D. The waiver of the right to collect punitive damages.

B. Don't mix up plaintiff and dependent AIncorrect. The cost of dependent's needs is a factor.

In a jewelry purchase, buyer Connie told her sister Jennifer to purchase three dozen gemstone bracelets. Jennifer bought braclets and necklaces from George who was a well-known silversmith. George, counting on the income, purchased silver from Tom but when Connie refused to pay for the necklaces and returned them, George could not pay Tom. In this situation, the agent is Choose one answer. A. Connie. B. Jennifer. C. George. D. Tom.

B. In the agency relationship, agent is the party that is authorized by the principal to act on the principal's behalf. C. Incorrect. Jennifer.

A windstorm causes a tree on the insured's premises to fall, breaking the electrical lines that enter the house. The loss of electrical power causes the food in the freezer to thaw and spoil. This loss is Choose one answer. A. Covered because damage resulting from loss of electrical power is covered. B. Covered because it was caused by a covered peril on the residence premises. C. Not covered because damage resulting from loss of electrical power is excluded. D. Not covered because food is not considered personal property.

B. Insured peril that occurs on the premises. A. Incorrect. This loss is covered because it was caused by a covered peril on the residence premises.

The reserve representing the estimated deficiency in the aggregate of case reserves for known claims are known as Choose one answer. A. Case reserves. B. Bulk reserves. C. Loss reserve accounts. D. Salvage reserves.

B. Page 1.45

Which one of the following best describes an aggregate loss cover reinsurance contract? Choose one answer. A. An aggregate loss cover reinsurance contract is typically prospective reinsurance. B. An aggregate loss cover reinsurance contract is often used as a part of insurer acquisitions. C. An aggregate loss cover reinsurance contract is typically retrospective reinsurance. D. An aggregate loss cover reinsurance contract allows a reinsurer to protect itself from adverse loss experience.

B. Page 1.56 *Retrospective aggregate loss covers have been used in numerous acquisitions of insurers, whereby the buyer of the insurer will want some protection against the acquired book of loss reserves developing adversely* C Incorrect. An aggregate loss cover reinsurance contract is often used as a part of insurer acquisitions.

Which one of the following statements is true if the named insured is an individual under the Commercial General Liability (CGL) Coverage Form? Choose one answer. A. His or her spouse is also an insured only when specifically listed on the declarations page. B. Coverage applies only to claims arising from the conduct of a business owned solely by the named insured. C. Both the named insured and spouse are covered for their non-business activities. D. Coverage is provided for any business owned by the insured's spouse.

B. Page 11.3 A Incorrect. The spouse meets the definition of an insured and therefore does not need to be listed on the declarations page.

Luis Munoz's corporation is insured under a Commercial General Liability (CGL) Coverage Form. On March 1, Luis acquired an additional organization but did not notify his insurer. On April 15, the acquired organization suffered a liability loss. Will Luis' CGL cover the liability loss of the newly acquired organization? Choose one answer. A. Yes, because newly acquired organizations, including partnerships and limited liability corporations, are automatically covered under the CGL as long as the insured notifies the insurer of the additional exposure within 120 days. B. Yes, because the newly acquired organization qualifies as a named insured and is covered for 90 days after its acquisition. C. No, because Luis did not notify his insurer of the acquisition. D. No, because Luis did not add the newly acquired organization as a named insured within 30 days of its acquisition.

B. Page 11.5 D Incorrect. There is coverage because newly acquired entities are covered for 90 days without notice to the insurer.

Contractor Jerry provides a bid bond guaranteeing he will enter into a construction contract if his bid is accepted by business owner Sue. If Jerry's bid is accepted, but he fails to enter into a construction contract, the issuer of the bid bond would pay Sue which one of the following? Choose one answer. A. The full amount of Jerry's bid B. The difference between the amount of Jerry's bid and the next lowest bid accepted plus additional expenses incurred due to Jerry's default C. The bond's "penalty" amount D. Nothing, since Jerry did not enter into a construction contract

B. Page 12.38 A Incorrect. If Jerry fails to fulfill his obligation, the surety will pay Sue the difference between the amount of Jerry's bid and the next lowest bid accepted plus additional expenses incurred due to Jerry's default.

William owned a hotel, a bar, and a convenience store, all located within the same strip mall. He had a policy to turn away any prospective customer with brown hair. Adam came to William looking for lodging, but Adam had brown hair, so William refused. Adam then went to the convenience store, but the worker there, who was employed by William, also refused to serve him. Adam finally ended up at the bar, and the bartender disagreed with William's discriminatory policies, so he served Adam a few drinks. Adam became unruly, and the bartender threw him out. He walked back to the hotel, and William saw that Adam was intoxicated, so he had Adam removed from the property. How many common law causes of action does Adam have against William, for the refusal to furnish services at public places? Choose one answer. A. None B. One C. Two D. Four

B. Page 13.24. Hotel operators had to furnish lodgings to anyone who could pay for them... unless intoxication. C Incorrect. Adam has one common law cause of action against William, refusing lodging.

In addition to the tort intentional infliction of emotional distress, plaintiffs can also allege an unintentional act which causes mental anguish and physical injury known as Choose one answer. A. Unintentional infliction of emotional distress. B. Negligent infliction of emotional distress. C. Deliberate infliction of emotional distress. D. Intentional mental anguish act.

B. Page 13.28 A Incorrect. In addition to the tort intentional infliction of emotional distress, plaintiffs can also allege an intentional act which causes mental anguish and physical injury known as negligent infliction of emotional distress.

Which one of the following statements is correct? Choose one answer. A. A party who is injured or whose property is damaged by a negligent third party has a right to recover only if the wrongdoer has liability insurance. B. Subrogation provisions in policy wordings prevent insureds from collecting from both negligent third parties and their own insurer. C. If a negligent third party causes injury and the injured party accepts settlement from his or her own insurer, the negligent party's responsibility to pay damages is eliminated. D. Insureds who are injured by negligent third parties cannot recover from their own insurer under their own policy.

B. Page 3.30 C. Incorrect. Subrogation provisions in policy wordings prevent insureds from collecting from both negligent third parties and their own insurer.

A named insured owns two cars, one covered by a Personal Auto Policy (PAP) and one with no insurance at all. Which one of the following is a correct statement regarding the medical payments coverage provided by the PAP if the insured is injured in a collision while driving the uninsured auto? Choose one answer. A. The PAP will provide medical payments coverage for medical care for the injuries under the insuring agreement. B. The exclusion of other vehicles owned by the insured or available for insured's regular use applies. C. The PAP will provide medical payments coverage for medical care for the injuries because the insured was driving a vehicle other than a covered auto. D. The exclusion of vehicles owned by or available for family member's regular use applies.

B. Page 4.31 A Incorrect. The exclusion of other vehicles owned by the insured or available for insured's regular use applies. The exclusion of vehicles owned by or available for family member's regular use does not apply to the named insured and spouse.

Anne and Joe have a home with a $300,000 replacement cost and an HO-3—Special Form (HO-3) with a Coverage A limit of $150,000. Lightning strikes the central air conditioning unit and destroys it beyond repair. The unit has a replacement cost of $5,000, is five years old, and has a useful life of 10 years. Ignoring any deductible that might apply, how much will the insurer pay to replace the air conditioning unit? Choose one answer. A. $2,500 B. $3,125 C. $4,125 D. $5,000

B. Page 6.27 The insured will received the *greater* of ACV or the limit/(80%*Repl Value) * Replacement cost A. Incorrect. The insurer will pay $3,125. $150,000 ÷ (80% × $300,000) × $5,000 = $3,125.

The Claim Expenses additional coverage under Section II of a homeowners policy covers Choose one answer. A. Premiums on bonds exceeding the personal liability limit. B. The insured's reasonable expenses at the insurer's request. C. Medical payments incurred by others. D. The insured's personal liability.

B. Page 7.7 Claim Expense: 1. Expense we incur 2. Premiums on bonds, however, not exceeding the policy's E limit 3. Reasonable expense as B. Parking, meal mileage 4. Postjudgement interest. A Incorrect. It covers reasonable expenses at the insurer's request. (These expenses may include loss of earnings up to $250 a day.) It does not cover the premium on bonds exceeding the personal liability limit. Personal liability and medical payments coverages are not additional coverages, but rather, Coverage E and Coverage F, respectively.

"Merchandise held in storage or for sale, raw materials and in-process or finished goods, including supplies used in their packing or shipping" is the Building and Personal Property Coverage Form's (BPP) definition for which one of the following? Choose one answer. A. Business personal property B. Stock C. Contents D. Inventory ID: 5829373 | Points: 1

B. Page 8.9 middle A Incorrect. The form defines stock as "merchandise held in storage or for sale, raw materials and in-process or finished goods, including supplies used in their packing or shipping."

The Agreement and Definitions page of the Personal Auto Policy (PAP) includes Choose one answer. A. The name of the insurer issuing the policy. B. A general agreement stating that the insurer is providing the coverage subject to payment of premium and to the terms of the policy. C. The name and mailing address of the insured. D. A general agreement stating the insurer's duty to pay damages and defense costs subject to the terms of the policy.

B. Page: 4.3 D Incorrect. The Agreement and Definitions page of the Personal Auto Policy (PAP) includes a general agreement stating that the insurer is providing the coverage subject to payment of premium and to the terms of the policy.

Some premium payment plans may include additional payments that exceed the amount required if the premium was paid in full at the policy inception. Such additional payments that are a function of the amount of premium payment are treated under U.S. regulatory accounting as Choose one answer. A. Part of the premium. B. Finance charges. C. Service charges. D. Additional premium.

B. See 1.34 the difference between Service Charge and Finance Charge in the box. *Finance charges are percentage and service charges are fixed amount.* C. Incorrect. Such additional payments that are a function of the amount of premium payment are treated under U.S. regulatory accounting as finance charges.

Under an HO-3—Special Form (HO-3), Section I—Exclusions contains an additional three exclusions that apply only to Coverage A—Dwelling and Coverage B—Other Structures. These exclusions include all of the following, EXCEPT: a. Weather b. Fraud c. Acts or decisions d. Damage that results from faulty construction, planning, or materials

B. There is no exclusion of fraud?!

Outdoor Sporting Goods Store has a Commercial General Liability (CGL) Coverage Form. While demonstrating the features of a small boat for a customer, an employee drops the anchor, injuring his foot. Does Outdoor Sporting Goods Store's CGL Coverage Form cover this loss? Choose one answer. A. No, because injuries resulting from the ownership of watercraft are excluded B. No, because injuries to employees are excluded C. Yes, because the store is legally liable for injuries caused by its products D. Yes, because the injury resulted from an "occurrence" not expected or intended

B. WC D Incorrect. The CGL policy excludes injuries to employees of the insured.

In which one of the following sections of an insurer's financial statement would forward-looking information be included? a. The cash flow statement b. The income statement c. Notes and disclosures d. The balance sheet

C

What is the two-fold purpose of a Terrorism Risk Insurance Act (TRIA) aggregate limit endorsement? Choose one answer. A. To offer broader coverage and provide a means of accounting for TRIA premiums B. To limit the insurer's exposure and to provide a means of accounting for TRIA premiums C. To limit the insurer's exposure and to provide limited coverage for acts of terrorism at a reduced premium D. To offer limited coverage and to provide a means of accounting for TRIA premiums

C BIncorrect. The two-fold purpose of a TRIA aggregate limit endorsement is to limit the insurer's exposure and to provide limited coverage for acts of terrorism at a reduced premium.

One of the purposes of the Terrorism Risk Insurance Act (TRIA) aggregate limit endorsement is to limit the insurer's exposure. What is the other purpose of the TRIA aggregate limit endorsement? Choose one answer. A. To provide a means of accounting for TRIA premiums B. To provide unlimited coverage for acts of terrorism C. To provide limited coverage for acts of terrorism at a reduced premium D. To provide a different means of marketing terrorism coverage

C A Incorrect. The second purpose of the TRIA aggregate limit endorsement is to provide limited coverage for acts of terrorism at a reduced premium.

When uncertainty exists, a conflict can arise between reliability and Choose one answer. A. Completeness. B. Transparency. C. Lack of bias. D. Verifiability.

C A Incorrect. When uncertainty exists, a conflict can arise between reliability and lack of bias.

Marge and her husband Jack have a Personal Auto Policy (PAP) to cover their two automobiles. Marge also has a company car provided by her employer. Which one of the following endorsements would best provide Marge with liability and medical payments coverage for her company car? Choose one answer. A. Named Non-Owner Coverage endorsement B. Miscellaneous Type Vehicle endorsement C. Extended Non-Owned Coverage—Vehicles Furnished or Available for Regular Use endorsement D. Auto Loan/Lease Coverage endorsement

C A. Incorrect. The Extended Non-Owned Coverage—Vehicles Furnished or Available for Regular Use endorsement would provide excess over any other applicable insurance on the company car. The differences between Extended Non-Owned Coverage (Extended) and Named Non-Owner Coverage (Named): 1. Extended is for Regular Used; Named is for occasionally used 2. So Named covers more items, including UM and UIM

The Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Coverage—Increased Limit endorsement may be appropriate for Choose one answer. A. Insureds who pay their bills online. B. Insureds who use automated teller machines. C. Insureds who hold credit cards. D. Insureds who tend to overspend because of credit availability.

C A. Incorrect. This endorsement provides coverage for losses resulting from unauthorized use of an insured's credit card.

Which one of the following elements is necessary to prevail in an assault case? Choose one answer. A. There is a fear that there may be physical contact immediately or sometime in the future. B. A threat is made regardless of whether the individual making the threat can actually act on it. C. A threat is made with the intent of creating fear or apprehension. D. The damages resulting from an assault are significant and measurable in nature

C B Incorrect. A threat is made with the intent of creating fear or apprehension.

Mark, a 50-year-old employee of Ajax Company (Ajax), is fired even though his annual performance reviews have indicated that his work has been outstanding. Mark believes he has been discriminated against because of his age and sues the directors of Ajax. What type of insurance policy does Ajax need to provide coverage for this type of lawsuit? Choose one answer. A. Employee benefits liability B. Employers liability C. Employment practices liability D. Employee indemnification liability

C B Incorrect. Ajax needs employment practices liability insurance.

Even when the duty to select investments for an employee benefits plan has been delegated to others, such as in a mutual fund or brokerage firm, the fiduciaries may be responsible for which one of the following? Choose one answer. A. Compliance with state insurance laws B. Negligence of the organization's directors and officers C. The errors or negligence of the investment managers D. Failure to properly endorse the commercial general liability policy

C B Incorrect. Fiduciaries may be responsible for the errors or negligence of the investment managers.

Which one of the following is an element of fraud that requires proof? Choose one answer. A. Harm B. Material information C. Reasonable reliance D. Recklessly made

C B Incorrect. Reasonable reliance concerns a misrepresentation which must be a reasonable inducement to the other party to act. Reliance must be justified.

A garden shop owner bought a machine to move pallets. The front-end loader had back up lights but both lights were obstructed by a lens guard. Until a customer who was behind the machine was badly injured, the defect had not been discovered. The basis of a lawsuit by the garden shop owner against the machine manufacturer should be Choose one answer. A. Material misrepresentation. B. Breach of warranty. C. Defect in design. D. Defect in assembly.

C D Incorrect. This is not material misrepresentation, breach of warranty, or defect in assembly but it is defect in design.

Which one of the following statements is correct with respect to the Control of Property condition of the Commercial Property Conditions Form? Choose one answer. A. It states that a violation of a policy condition at one location will suspend coverage at all locations. B. It prohibits the insured from abandoning damaged property to the insurer. C. It states that coverage under the policy will not be affected by acts or omissions of persons other than the insured, if the others are not acting under the direction or control of the insured. D. It requires the insured to give the insurer access to the premises in order to make inspections and to review the insured's accounting and other records.

C D Incorrect. This is not part of the Control of Property condition.

An insured plumbing contractor is installing copper water lines in a new building for a general contractor. While soldering a connection, the plumber causes a fire that damages the building, including the copper water lines. The plumber is covered under an unendorsed Commercial General Liability (CGL) Coverage Form. Which one of the following best explains how the plumber's CGL Coverage Form applies to a claim for the building damage, including damage to the copper water lines? Choose one answer. A. Coverage applies because the damaged property was in the plumber's care, custody, and control. B. Coverage does not apply because the general contractor's CGL policy would respond. C. Coverage applies to the building damage but excludes the damage to the copper water lines being installed by the plumber. D. Coverage applies to the building damage including damage to the copper water lines being installed by the plumber.

C 10.19 bottom B Incorrect. Coverage applies to the building damage but not to the damage to the copper water lines being installed by the plumber.

FridgeCo, an appliance retailer, owned a storefront and the sidewalk by the entrance to the facility was always damaged. Very few people other than FridgeCo employees noticed the damage, however. A customer came to the FridgeCo store to buy a mini-fridge, but got into an argument with the owner. The owner asked the customer to leave, and when the customer angrily stormed out, she tripped on the broken sidewalk and injured her ankle. Which one of the following most accurately assesses FridgeCo's duties and liabilities concerning the customer, in most jurisdictions? Choose one answer. A. The customer was a business invitee, so FridgeCo had a duty to exercise reasonable care to keep her safe. B. The customer was a trespasser, but FridgeCo had a duty to warn her of obvious dangers. C. The customer was a business invitee, but FridgeCo was not liable for defects in sidewalks. D. The customer was an implied licensee who became a trespasser, so FridgeCo owed her no duty whatsoever.

C 13.23 A Incorrect. The customer was a business invitee, but FridgeCo was not liable for defects in sidewalks.

A reinstatement clause in a life insurance policy Choose one answer. A. Continues a life insurance policy in force for 30 days after the premium due date, allowing the policyowner the opportunity to pay the overdue premium to reinstate the policy. B. Continues a life insurance policy in force for 60 days after the premium due date, allowing the beneficiaries the opportunity to pay the overdue premium to reinstate the policy. C. Gives the policyowner the right to reinstate a life insurance policy that has lapsed for nonpayment of premium. D. Gives the insurer the option, but not the obligation, to reinstate policies for lapsed policyholders who wish to reactivate coverage.

C Correct. A reinstatement clause in a life insurance policy gives the policyowner the right to reinstate a life insurance policy that has lapsed for nonpayment of premium.

Generally, more than one causes of loss form is used in a commercial property coverage part for which one of the following reasons? Choose one answer. A. Business personal property, which is more subject to loss, is always insured on a more restricted basis than are buildings. B. Most insureds would like to cover their personal effects for loss by theft. C. The underwriter is reluctant to provide the broader coverages for certain types of property. D. Using multiple causes of loss forms in a single policy is standard industry practice.

C Correct. Different causes of loss forms are sometimes used in the same policy because underwriters are sometimes reluctant to provide the broader coverages for certain types of property.

Which one of the following statements is correct with respect to the covered causes of loss under the Causes of Loss—Basic Form? Choose one answer. A. Vandalism includes loss by theft. B. Lightning includes artificially generated electrical current. C. Explosion includes the explosion of gases or fuel in a furnace or flue. D. Smoke covers damage by smoke from industrial operations or agricultural smudging.

C Correct. Explosion includes the explosion of gases or fuel in a furnace of flue. Vandalism includes loss by theft is not covered by basic form.

Under which one of the following provisions of the Building and Personal Property Coverage Form (BPP) must the insurer be notified within 180 days after the occurrence of loss that a claim will be made under the terms of the optional coverage in order for that optional coverage to pay the maximum benefit available? Choose one answer. A. Agreed Value B. Inflation Guard C. Replacement Cost D. Extension of Replacement Cost to Personal Property of Others

C Correct. The insurer must be notified within 180 days after the occurrence of loss that a claim will be made for replacement cost.

Which one of the following statements is correct with respect to the effect optional coverages of the Building and Personal Property Coverage Form (BPP) have on premiums? Choose one answer. A. Replacement cost insurance requires a higher rate than ACV coverage. B. Adding optional coverages increases an insurer's policy processing costs and so an administration fee is charged. C. In some cases, the limit of insurance must be increased to cover the additional property values being insured. D. The charge for a coverage option always involves a separate additional rate applied to the amount of insurance.

C Correct. The limit of insurance must be increased to cover the additional property values being insured. A. Page 9.24. Replacement cost does not involve a higher rate, but AOI needed to meet the coinsurance requirement maybe considerably higher than ACV

Following an auto accident, Jim's vehicle was towed to a body shop, and it remained there for five days for repairs. The damage was covered under the collision coverage of Jim's Personal Auto Policy (PAP). During those five days, Jim used public transportation at a cost of $5.00 per day. What amount will Jim's insurer pay under his PAP for his transportation expenses while his vehicle was being repaired? Choose one answer. A. $0 B. $15 C. $20 D. $25

C. B Incorrect. $20. While a forty-eight-hour waiting period applies to total theft losses under OTC coverage, a twenty-four-hour waiting period applies to loss by other perils under both collision and OTC.

Which one of the following might be a reason for a regulatory accounting system to gross up the reported premiums by the amount of credits for large deductible arrangements? Choose one answer. A. To offset the negative impact on reported earned premiums B. To avoid the negative impact of falling insurer loss ratios reported to the state C. To avoid a negative impact on smaller insureds under a premium assessment system D. To discourage the use of large deductible plans by insureds in an effort to avoid state premium taxes

C Correct. To avoid a negative impact on smaller insureds under a premium assessment system a regulatory accounting system might gross up the reported premiums by the amount of credits for large deductible arrangements. Premium assessable can be used to fund the safety program to avoid liability. This premium should include the large deductible premium credit to the large insured, even if they have better safety program to afford the large deductible.

Garth insures his home with an HO-3—Special Form (HO-3). Garth was invited to a party at the apartment of his friend, Julie. Garth was having trouble closing the front door behind him as he entered the apartment. He pulled the door hard, which shook the walls and caused a vase to fall off of a shelf and break into pieces. Julie made a claim against Garth for the replacement cost of the vase, which was $1,108. Garth's insurer did not believe that the accident was Garth's fault in any way. How much did the insurer pay to Julie? Choose one answer. A. $0 B. $554 C. $1,000 D. $1,108

C Correct. Under the Damage to Property of Others additional coverage, the insurer will pay, at replacement cost, up to $1,000 per occurrence for property damage to others caused by an insured, regardless of fault or legal liability. (Note: some exclusions exist.)

Insurers that offer professional liability and management liability policies usually have a claims-made trigger. The reason for this is which one of the following? Choose one answer. A. Claims are settled on an extended coverage basis. B. Claims are not settled until after the statute of limitations date has been reached. C. Claims are sometimes not settled until long after the policy has expired. D. Claims are sometimes not settled under arbitration but require long term litigation.

C Page. 12.11 B Incorrect. Claims are sometimes not settled until long after the insurance policy has expired.

James made settlement on a new house and purchased a homeowners policy to protect it effective June 1st. The new house needed some work, so James did not plan on moving in until July 1st. He maintained his apartment lease and rental insurance for the month. Which one of the following additional sources of recovery did this situation present for James' personal property? Choose one answer. A. Other insurance in dissimilar policies B. Noninsurance agreements C. Other insurance in a similar policy D. Other insurance in the same policy

C correct. Rental and HO are similar policies example A. Incorrect. Other insurance in a similar policy

Which one of the following statements relating to the use of property insurance deductibles is correct? a. Risk transfer mechanisms such as insurance are designed to cope with low-severity property losses. b. For most property insurance policies, the premium reduction is directly proportional to the size of the deductible. c. Property insurance deductibles reduce premium costs by encouraging insureds to prevent or reduce losses. d. Small property insurance deductibles help eliminate dollar trading.

C is correct. I got it right but worth re-visit

Bert and Maggie insure their house with an unendorsed HO-3—Special Form (HO-3) with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A fire destroys their detached garage. The cost to replace the garage is $35,000. Ignoring any deductible that may apply, how much will Bert and Maggie's insurer pay to replace the detached garage? Choose one answer. A. $20,000 B. $25,000 C. $30,000 D. $35,000

C. D Incorrect. The insurer will pay $30,000, which is the limit (10% of Coverage A) for Other Structures.

Which one of the following is a policy liability that might exist on an insurer's balance sheet? Choose one answer. A. Liability for policies that have yet to be written B. Liability for possible renewals of property insurance contracts with no guaranteed pricing C. Liability for level premium renewable term life insurance D. Liability for reinsurance recoverables

C. D. Incorrect. Liability for level premium renewable term life insurance is a policy liability that might exist on an insurer's balance sheet. Page 1.18 - This belongs to Policy liabilities

The cost to replace property with new property of like kind and quality less depreciation is referred to as the Choose one answer. A. Replacement cost. B. Selling price. C. Actual cash value. D. Depreciated value.

C. A Incorrect. The cost to replace property with new property of like kind and quality less depreciation is referred to as the actual cash value (ACV).

A state insurance department is concerned about how fast auto liability coverage costs have been rising. The department wishes to limit future increases in rates. The least burdensome form of regulation to achieve this goal is Choose one answer. A. Open competition. B. Use and file. C. Flex rating. D. Prior approval

C. A Incorrect. The least burdensome form of regulation to achieve this goal is flex rating.

Chris and Bill have their family insured under a plan that allows them to select their own healthcare provider without any restrictions. The plan then reimburses them for a percentage of their medical expenses after the satisfaction of a deductible. This is an example of Choose one answer. A. A preferred provider organization plan. B. A health maintenance organization plan. C. An indemnity plan. D. A point-of service plan.

C. A Incorrect. This is an example of an indemnity plan.

Joe and Kitty Clements have a Personal Auto Policy (PAP). Their granddaughter, Katherine, lives with them. Does Katherine qualify as a "family member"? Choose one answer. A. No, Katherine is not a ward or foster child. B. No, Katherine has not been adopted by the Clements. C. Yes, as long as Katherine is a resident of the household. D. Yes, as long as Katherine is an operator of a vehicle owned by the household.

C. A family member is a person related to the named insured by blood, marriage or adoption who *resides in the named insured's household*

Clarence entered into a contract bond that guarantees his insulation work will be free from defects in materials and workmanship for a specified period of five years after completion of the work. The type of bond used by Clarence is a Choose one answer. A. License and permit bond. B. Performance bond. C. Maintenance bond. D. Bid bond.

C. B Incorrect. Clarence used a maintenance bond.

In a lawsuit involving a vehicle accident, a court finds three parties partially at fault. The plaintiff John was 20 percent at fault, Carl, the other driver, was 70 percent at fault, while Bud City (the municipality) was 10 percent at fault. If John proves damages of $100,000 and finds Carl is bankrupt, then under the Uniform Contribution Among Joint Tort Feasors Act (UCAJTFA), Bud City would be liable for Choose one answer. A. None of the damages. B. 10 percent of the damages. C. 80 percent of the damages. D. 100 percent of the damages.

C. B Incorrect. John was only 20 percent at fault and therefore the remaining 80 of fault falls to the municipality since Carl has no resources.

A homeowners policy premium is determined by first developing the base premium. The base premium is influenced by certain factors, including which one of the following? Choose one answer. A. Package policy credits B. Claim history C. Policy form D. Insurance score

C. B. Incorrect. The base premium is influenced by certain factors, including the policy form.

Emilia lived on a farm in rural North Dakota. Her neighbor, Lucas, planted a garden by Emilia's property. Emilia knew that Lucas's garden was at risk of damage from flowing rainwater because of the hills at the edge of her property. Emilia also knew that the trees on her property were old and could fall in strong winds. During the next storm, the garden was destroyed by a combination of rainwater, falling branches, and rocks rolling from Emilia's hills. Which one of the following is correct concerning whether Lucas has a claim against Emilia for any or all of the natural conditions that destroyed his garden? Choose one answer. A. Emilia is liable for the water and tree branches, but not the rocks, because she was not aware of that particular danger. B. Emilia is liable for all the natural conditions on her land that caused injury off her land, except for rainwater. C. Emilia's only duty in this case was to remove the old trees that she knew might fall, and she is not liable for any other natural conditions. D. Emilia is not liable for the damage to the garden, because, in rural areas, landowners have no affirmative duty to inspect trees, rocks, or rainwater runoff.

C. D Incorrect. Emilia's only duty in this case was to remove the old trees that she knew might fall, and she is not liable for any other natural conditions.

An insured is reviewing the Commercial Package Policy (CPP) to determine which conditions apply to all coverage parts in the policy. One of those conditions states that Choose one answer. A. Changes can be made by the insurer or insured by verbally contacting the other. B. Both the insured and insurer can cancel the policy with 30 days notice for certain reasons. C. The insurer has the right to do an on-site inspection of the insured's books and records. D. The insurer will inspect the property to verify the compliance with safety regulations.

C. D Incorrect. The insurer has the right to do an on-site inspection of the insured's books and records. Doesn't guarantee, page9.16

Ralph has an unendorsed HO-3—Special Form (HO-3) policy. While coming home from a coin show, Ralph discovers that his automobile was broken into and a package containing $2,000 in coins, some tools, and groceries was stolen. Disregarding any deductible that may apply, will Ralph's HO-3 insurer pay for the loss of the coins? Choose one answer. A. No, theft of money is an excluded peril. B. No, leaving money in an unattended vehicle is negligent behavior, which is excluded. C. Yes, the coins are covered up to a specified limit. D. Yes, the coins are covered up to the limit of Coverage C as long as they are of a collectible nature.

C. D. Incorrect. Yes, the coins are covered up to a specified limit ($200).

Generally, how do courts determine that a defendant is liable under negligence per se? Choose one answer. A. Courts determine that a defendant is negligent per se when the defendant took on the risk of liability under a contract. B. Courts determine that a defendant is negligent per se when the defendant has committed a wanton immoral act. C. Courts determine that a defendant is negligent per se when the defendant has violated a statutory standard. D. Courts determine that a defendant is negligent per se when the defendant is in all likelihood negligent under the given circumstances.

C. 13.12. D Incorrect. Courts determine that a defendant is negligent per se when the defendant has violated a statutory standard.

Lucy owned an apartment complex and rented one of the apartments to Daniel. The wiring in Daniel's apartment was faulty, and certain light switches, if operated with wet hands, could give off nasty electric shocks. Lucy knew about this condition, and knew that Daniel would not be able to detect it, but Lucy did not tell Daniel about the light switches. Daniel did shock himself, and suffered minor burns as a result. Which one of the following correctly identifies whether Lucy is liable for Daniel's injuries, at common law and under today's law? Choose one answer. A. Not liable at common law, not liable under today's law B. Liable at common law, not liable under today's law C. Not liable at common law, liable under today's law D. Liable at common law, liable under today's law

C. 13.24 about today's law = common law today and regulation D Incorrect. Not liable at common law, liable under today's law

Rosa's sedan is covered by a Personal Auto Policy (PAP) with split limits for liability coverage of $100/$300/$50. Rosa's friend, Lamont, owns a sports car that is covered by a PAP with split limits for liability coverage of $25/$50/$10. Rosa borrowed Lamont's sports car and caused an accident with another vehicle driven by James. James and his passenger, Fred, were injured and they filed suit against Rosa. A court awarded $35,000 to James for his bodily injuries and $110,000 to Fred for his bodily injuries. How much will be paid under each policy? Choose one answer. A. $29,000 under Lamont's policy and $116,000 under Rosa's policy B. $35,000 under Lamont's policy and $110,00 under Rosa's policy C. $50,000 under Lamont's policy and $95,000 under Rosa's policy D. $95,000 under Lamont's policy and $50,000 under Rosa's policy

C. Correct. $50,000 under Lamont's policy and $95,000 under Rosa's policy. If other liability coverage is available on a nonowned vehicle, the PAP coverage is excess over any other collectible insurance. To James: $25,000 from Lamont's PAP and $10,000 from Rosa's. To Fred: $25,000 from Lamont's PAP and $85,000 from Rosa's. Be careful, I was thinking about the second 50k not using the 25k limit in my calculation.

Regarding premium recognition, which one of the following treatments might be used for a continuous policy to account for written premium? Choose one answer. A. Pro rata written premium recognition as the premiums become earned B. A written premium definition based only on the first year of the continuous policy C. Annual premium payments viewed as a series of annual policies with only the current year premium treated as "written" D. A written premium definition based on representative years of the continuous policy and using those years as the base for recognition

C. Correct. For a continuous policy, the annual premium payments may be viewed as a series of annual policies with only the current year premium treated as "written". *Continuous policies: Policies of indefinite term, such as reinsurance treaties that are automatically renewed annually unless canceled before a new year begins. *

In which one of the following family structures is the risk of incurring child-care costs over a prolonged period a unique consideration in establishing life insurance needs? Choose one answer. A. Sandwiched family B. Traditional family C. Blended family D. Single-parent family

C. Correct. In a blended family, the risk of incurring child-care costs over a prolonged period is a unique consideration in establishing life insurance needs.

Tim and Kelly have a Personal Auto Policy (PAP) with liability limits of $100/$300/$50. They were at fault in an accident when they lost control of their vehicle and ran into a van, injuring eight passengers in the van. There was a $600,000 judgment against Tim and Kelly, which was the total of $75,000 for each of the eight passengers in the van. Defense costs totaled $25,000. How much will Tim and Kelly's PAP insurer pay for this accident? Choose one answer. A. $100,000 B. $300,000 C. $325,000 D. $625,000

C. Defense cost is in addition to the limit. I was thinking what Tim and Kelly will pay. B Incorrect. Tim and Kelly's PAP insurer will pay $325,000 for this accident. The $300,000 per accident limit applies, plus $25,000 in defense costs.

Louise has a Personal Auto Policy (PAP) with liability limits of $100/$300/$50 insuring her SUV and sedan. Louise's daughter, Tina, who lives in another state, borrowed Louise's sedan while Tina's car was in the shop for maintenance work. Tina has a Personal Auto Policy (PAP) with limits of $250/$500/$50. Tina, talking on her cell phone, was distracted while driving the sedan and rear-ended the car in front of her causing minor damage. The liability loss resulting from this accident will be Choose one answer. A. Not covered by Louise's insurer or Tina's insurer. B. Shared by both Louise's insurer and Tina's insurer. C. Paid by Louise's insurer. D. Paid by Tina's insurer.

C. I am thinking too much. Tina's insurer should be paying on the excess basis. B Incorrect. The liability loss resulting from this accident will be paid by Louise's insurer.

Under the deferral-matching approach to premium accounting Choose one answer. A. The policy premium is recognized as revenue at the time when the insurance contract is signed. B. Revenue is recognized once the insurer gains control of the asset resulting from the revenue. C. Written premiums are generally defined as the amount of premium charged for that policy during the reporting period. D. There is no unearned premium and other liabilities must be established for losses expected during the unexpired policy period.

C. P 1.24. Analog to exam 5. WP is defined as the transactions during the period. Not necessary to include the original charge amount for the original reporting period. D. Incorrect. Written premiums are generally defined as the amount of premium charged for that policy during the reporting period.

Which one of the following accounting standards or rules may apply to self-insured liabilities related to workers compensation claims? Choose one answer. A. Insurance accounting B. Generic accounting C. Employee benefit accounting D. Financial accounting

C. Page 1.52 Related to EE - employee benefit accounting Non-related to EE - Generic accouting B. Incorrect. Employee benefit accounting rules may apply to self-insured liabilities related to workers compensation claims.

An adjustment for risk in the commutation of a reinsurance agreement Choose one answer. A. Decreases the economic value. B. Does not affect the economic value. C. Increases the economic value. D. Equals the economic value.

C. Page 1.55. The risk adjustment is used as a risk load on to the discounted view of future paid losses. (*To account for the interest rate risk and adverse development*) D is incorrect. An adjustment for risk in the commutation of a reinsurance agreement increases the economic value

The named insured under a Commercial General Liability (CGL) Coverage Form dies, and Sarah becomes a temporary custodian of the named insured's property. The coverage for Sarah under the deceased named insured's CGL form applies only to liability arising out of Choose one answer. A. The named insured's premises. B. Losses that occurred within 60 days after the death of the named insured. C. The maintenance or use of the named insured's property. D. Contractual obligations.

C. Page 11.5 about legal representatives A Incorrect. Sarah's coverage is only for liability arising out of the maintenance or use of the named insured's property.

Jack insures his house with an unendorsed HO-3—Special Form (HO-3) with a Coverage A—Dwelling limit of $250,000, which is the replacement cost of the house. A thief breaks into the house while Jack is on vacation and steals his gun collection valued at $7,500. Ignoring any deductible that may apply, how much, if any, will Jack's HO-3 insurer pay for the loss to the guns? Choose one answer. A. $0 B. $1,500 C. $2,500 D. $7,500

C. Page 6.14, recite all!!! B. Incorrect. The insurer will pay $2,500 for the guns.

Which one of the following statements is correct with respect to the Newly Acquired or Constructed Property extension of coverage of the Building and Personal Property Coverage Form (BPP)? Choose one answer. A. It provides automatic coverage for a new building being constructed by or for the insured anywhere within the coverage territory. B. It specifically excludes coverage for a newly acquired or constructed building at any location if that building will be used as a warehouse. C. It covers newly acquired buildings, provided the purpose of the newly acquired building is similar to the use of the building described in the declarations. D. This extension applies to buildings only and does not provide any coverage for business personal property.

C. Page 8.14. and/or *warehouse* D Incorrect. Business personal property is also covered under certain circumstances.

Which one of the following statements is correct with respect to the Non-Owned Detached Trailers coverage extension of the Building and Personal Property Coverage Form (BPP)? Choose one answer. A. The trailer can be used anywhere in the United States. B. The coverage applies while the trailer is attached to any motor vehicle or motorized conveyance, provided it is not in motion. C. It permits the insured to extend "your business personal property" to include trailers leased to expand office space or to provide additional storage or work areas. D. Coverage is available only if the insured has no contractual responsibility for loss or damage to the trailer.

C. Page 8.16 D Incorrect. Coverage is available only if the insured *HAS* a contractual responsibility for loss or damage to the trailer.

Paris Cuisine, a fine-dining restaurant, rents space in a commercial building, which is insured by its owner. Paris Cuisine spends $50,000 on wallpaper, floor coverings, windows, and other improvements that would remain in the building if Paris Cuisine were to move out. Paris Cuisine's interest in these improvements is insured under which one of the following? Choose one answer. A. The building portion of Paris Cuisine's Building and Personal Property Coverage Form (BPP) B. The leasehold improvements section of the building owner's BPP C. The business personal property section of Paris Cuisine's BPP D. The property of others section of the building owner's BPP

C. Paris Cuisine purchases a tanent's commercial property policy. Page 8.9 D is Incorrect. Paris Cuisine's interest in the improvements is insured under the business personal property section of Paris Cuisine's BPP.

Which one of the following is a peril insured against for Coverage C under an HO-3—Special Form (HO-3)? Choose one answer. A. Neglect B. War C. Aircraft D. Intentional loss

C. Peril Insured Against is *covered* D. Incorrect. Aircraft is a peril insured against for Coverage C under a HO-3 policy.

Li has a Personal Auto Policy (PAP) for his car with a $100,000 limit for uninsured motorists (UM) coverage. He was injured in an accident with a legally intoxicated uninsured motorist. Li submitted a UM claim to his insurer. The case went to trial and Li was awarded $50,000 for medical bills, $10,000 for rehabilitation expenses, $5,000 for lost wages, and $10,000 for punitive damages. How much can Li collect under the UM coverage of his PAP? a. $50,000 b. $55,000 c. $65,000 d. $75,000

C. Punitive is not covered

Some states' underinsured motorists (UIM) coverage endorsements contain a "limits trigger." In states that apply the UIM limits trigger, UIM coverage applies when a. The insured has failed to maintain the minimum limits required for bodily injury liability. b. The insured has failed to acquire medical payments coverage for any injuries received while occupying a motor vehicle. c. The negligent driver carries liability limits below the limits provided by the UIM coverage of the injured party. d. The negligent driver carries liability insurance limits that are lower than the injured party's actual damages.

C. This is specific to limits trigger states

In terms of landowners' duties to people on their property, which one of the following is the best definition of a licensee? a. A person who unintentionally enters onto the property without the legal right to do so, and who is owed no duty by the landowner b. A person given permission to be on the land for business reasons only, and who is owed the duty of reasonable care c. A person who enters the property for the landowner's benefit, and who is owed an active duty of great care d. A person with express or implied permission to enter onto the land for his or her own purpose, and who is owed a duty to be warned of hidden defects

D

Marti fell asleep on a towel while sunbathing on the beach. A driver of a motorized all-terrain vehicle designed for off-road use ran over her, severely injuring her. No liability insurance coverage pertained to the accident. Marti made an uninsured motorist (UM) coverage claim under her Personal Auto Policy (PAP). Marti's claim Choose one answer. A. Should be paid under the Other Insurance clause. B. Should be paid under the public or livery conveyance provision. C. Should be denied because the all-terrain vehicle owner would be considered self-insured. D. Should be denied because it involves no uninsured motor vehicle as defined by the PAP.

D A. Incorrect. Marti's claim should be denied because it involves no uninsured motor vehicle as defined by the PAP.

Joel is a delivery driver for XYZ Auto Supply. He usually drives the company van, but one day, since he only had to deliver a small part, Joel used his own car that is insured with a Personal Auto Policy (PAP). While doing so, Joel was involved in a two-vehicle accident and a liability claim was made against Joel and XYZ Auto Supply. Identify the insured(s) under Joel's PAP in this situation. Choose one answer. A. None B. Joel only C. XYZ Auto Supply only D. Joel and XYZ Auto Supply

D A Incorrect. Joel and XYZ Auto Supply. Part A covers any person or organization legally responsible for the acts of a covered person while using a covered auto. Joel is a covered person while driving his car, and the employer is responsible for his actions as an employee.

Under the Legal Action Against Us condition of the Commercial Property Conditions Form, if the insured wishes to bring legal action against the insurer, he or she must do so within which one of the following timeframes? Choose one answer. A. Sixty days after the insurer denies coverage for a loss B. One year from the date on which the insured notifies the insurer of his or her intention to sue C. Three years after the insurer's action that has given rise to the suit D. Two years after the date on which the direct physical loss occurred

D A Incorrect. The action must be brought within two years after the date on which the direct physical loss occurred.

Which one of the following statements is true regarding insurance coverage for foreign operations? Choose one answer. A. Commercial insurance policies usually provide worldwide coverage. B. Foreign voluntary workers compensation policies exclude coverage for transportation expense to return disabled or deceased employees to the United States. C. Foreign voluntary workers compensation policies do not provide coverage for endemic diseases. D. Small to mid-sized businesses in the United States frequently must concern themselves with foreign exposures.

D B Incorrect. Commercial insurance does not provide worldwide coverage, and foreign workers compensation policies often cover transportation expenses and endemic diseases.

Edna, who participates in a homeowners' reciprocal exchange knows that the members of the exchange insure members' loss exposures. A policy issued by the reciprocal insurer specifies the attorney-in-fact's authority to implement its powers on behalf of Edna and the other members of the exchange. Information regarding the powers of the attorney-in-fact is most likely to be found in Edna's policy's Choose one answer. A. Declarations. B. Insuring agreement. C. Conditions. D. Miscellaneous provisions.

D B Incorrect. Miscellaneous provisions. Miscellaneous provisions Examples on 2.23: 1. A policy issued by a mutual insurer is likely to describe each insured's right to vote in the election of the board of directors 2. A policy issued by a reciprocal insurer is likely to specify the attorney-in-fact's authority to implement its powers on the insured's behalf

Which one of the following statements about Blue Cross and Blue Shield plans is true? Choose one answer. A. They are usually considered commercial insurers and regulated by the same laws. B. Their biggest limitation is that they offer only basic medical expense coverage. C. They typically reimburse insureds for medical expenses incurred, and then the insureds pay providers. D. They are often administered by for-profit organizations.

D Correct. They are often administered by for-profit organizations.

Red Contracting (Red) hires a subcontractor, which uses its own bulldozer to move earth at Red's building site. Red secures a certificate of insurance from the subcontractor. While grading the site, the subcontractor damages an adjacent, unoccupied building causing the building to collapse. Does Red's commercial general liability (CGL) policy cover the subcontractor for its actions? Choose one answer. A. Yes, because the subcontractor is under a contract and working at the direction of Red B. Yes, because the subcontractor is a legal representative of Red for this project C. No, because the property damage was caused by the use of mobile equipment, which is excluded under the commercial general liability policy D. No, because the subcontractor is not an insured under Red's CGL policy

D B Incorrect. The subcontractor is not covered because it is not an insured under Red's policy.

Once every two months, the Mayor organized an arts and crafts fair at the city park. The Mayor was responsible for selecting and funding groups from the community to participate. By law, the Mayor was required to organize one arts and crafts event a year, but not necessarily at the park. Students from a local school wanted to take part in the next fair, but the Mayor hated their school so he turned them down. Which one of the following statements correctly assesses whether or not the Mayor's actions are immune from liability in this case? Choose one answer. A. The Mayor is directed by law to organize the fairs, so he is immune from liability for decisions made about the fairs. B. Maintaining a park is a uniquely government function, so the Mayor is not immune from liability over disputes about park events. C. The Mayor has the discretion to choose or not choose community participants, and discretionary acts are immune from liability. D. Official acts by government officials are not immune from suit when they are performed with malice and bad faith.

D C Incorrect. Official acts by government officials are not immune from suit when they are performed with malice and bad faith.

Keith created a tennis ball return machine that tennis pros favor because of the high velocity of the machine. The speeds of return are random and Keith posts the range of speed on the box. A 13-year-old tennis player loses his eye in an accident due to a ball being returned at a very high speed. In this situation, the type of product defect that would most likely lead to a liability suit against Keith is which one of the following? Choose one answer. A. Defect in manufacture B. Defect in assembly C. Defect in design D. Failure to warn

D C Incorrect. There is no indication of defect in manufacturer, assembly or design.

In addition to general duties under a Personal Auto Policy (PAP), a person seeking coverage under Part D—Coverage for Damage to Your Auto must perform additional duties. Which one of the following is one of these additional duties? Choose one answer. A. Promptly notify police if a hit-and-run driver was involved in the accident B. Submit to a physical examination conducted by a doctor chosen by the insurer C. Submit a proof of loss when required by the insurer D. Promptly notify police if a covered auto is stolen

D Struggled with A or D. A is Incorrect. This is an additional duty required for UM coverage. In addition to general duties under a Personal Auto Policy (PAP), a person seeking coverage under Part D—Coverage for Damage to Your Auto must promptly notify police if a covered auto is stolen. This may increase the possibility that the vehicle will be recovered.

Regarding coverage for foreign operations, which one of the following statements is true? Choose one answer. A. Like homeowners policies, commercial insurance policies also provide worldwide coverage. B. Foreign voluntary workers compensation policies seldom include coverage for transportation expenses to return disabled or deceased employees to the United States. C. Standard forms for foreign operations workers compensation exposures are available. D. Each insurer in the foreign voluntary workers compensation insurance market develops its own policy wording.

D 12.31 B Incorrect. Foreign voluntary workers compensation policies often include coverage for transportation expenses to return disabled or deceased employees to the United States.

Which one of the following statements regarding the extent of damages in liability claims is true? Choose one answer. A. The insured/defendant usually has the burden of proof regarding bodily injury and property damage proximately caused by his or her acts. B. A claimant generally may not recover damages to compensate for loss of use of damaged property. C. Unlike property damage claims, evaluation of bodily injury claims considers a narrow range of damage elements for the claimant. D. A claimant in a bodily injury or property damage liability claim has a duty to mitigate loss after an accident.

D Correct. A claimant in a bodily injury or property damage liability claim has a duty to mitigate loss after an accident. A wrong because it is claimant's burden of proof

Except for policies covering airlines, aircraft policies cover which one of the following? Choose one answer. A. All aircraft owned by the named insured B. Aircraft in a fleet, on a blanket basis C. Any aircraft used by the named insured D. Only the plane or planes specifically described in the policy

D Correct. Except for policies covering airlines, aircraft policies cover only the aircraft specifically described in the policy.

Sarah and Ernest Ridley have an unendorsed Personal Auto Policy (PAP) covering Sarah's sedan and Ernest's SUV with the following coverages and limits: Liability $100,000/$300,000/$50,000 Medical Payments $5,000 Uninsured Motorists $100,000/$300,000 Other Than Collision Actual Cash Value Less $250 Collision Actual Cash Value Less $500 Ernest was running errands in the SUV along with Sarah and their granddaughter, Millie. As a deer ran across the road in front of him, Ernest lost control of the vehicle and struck a parked car. The damages and costs from the accident are as follows: Damages to the SUV $15,000 Damages to the parked car $8,500 Ernest's medical injuries $10,000 Sarah's medical injuries $7,000 Millie's medical injuries $4,000 Defense cost $7,500 How much, if any, would Ridley's PAP insurer pay under Part B—Medical Payments Coverage? Choose one answer. A. $ 0 B. $ 4,000 C. $ 5,000 D. $14,000

D Correct. The PAP insurer would pay $5,000 for Ernest's medical injuries, $5,000 for Sarah's medical injuries, and $4,000 for Millie's medical injuries for a total of $14,000 under Part B—Medical Payments.

The inspections and surveys condition, a common policy condition attached to the ISO Commercial Package Policy, makes it clear that the insurer has the right to inspect the insured premises and Choose one answer. A. Will make regular physical inspections. B. May make safety inspections. C. Will inspect books and records. D. May recommend changes.

D Page 9.16 C. Incorrect. They may recommend changes.

A payment bond is a contract bond guaranteeing which one of the following? Choose one answer. A. A person appointed by a court to administer the property of others will faithfully perform his or her duties. B. The obligee will receive payment for loss or damage resulting from violation of the duties imposed on the licensee. C. The work will be free from defects in materials and workmanship for a specified period after the project is completed. D. The project will be free of liens.

D is correct.

Charlotte rented a house in New York. There was a large sinkhole in Charlotte's property, a short distance from a public road, but Charlotte left the hole unmarked. The hole was practically invisible at night. One evening, a police officer chased a mugger off the road and onto Charlotte's property, and both the officer and the mugger fell into the hole and broke their legs. Which one of the following best answers whether Charlotte is liable for the injuries to the police officer or to the mugger? Choose one answer. A. Charlotte is liable to both the officer and the mugger, because she had a duty to avoid endangering travelers with unguarded ditches. B. Charlotte is not liable to either the officer or the mugger, because they were both trespassers. C. Charlotte is not liable to either the officer or the mugger, because occupiers of land have no duty to correct defects abutting sidewalks or streets. D. Charlotte is liable to the officer for the unguarded ditch, because the officer was a licensee, but she is not liable to the trespassing mugger.

D is correct. C Incorrect. Charlotte is liable to the officer for the unguarded ditch, because the officer was a licensee, but she is not liable to the trespassing mugger.

In the Personal Auto Policy (PAP) definitions, "Your covered auto" includes all of the following classes of vehicles, EXCEPT: Choose one answer. A. A trailer owned by the insured B. A temporary substitute auto or trailer C. A newly acquired auto D. A trailer rented by the insured

D is not covered auto. Covered auto are: A. A trailer owned by the insured B. A temporary substitute auto or trailer (due to breakdown, repair, servicing, loss or destruction) C. A newly acquired auto plus any vehicle shown in the declrations

Group life insurance provides coverage to a number of individuals under one master contract issued to a sponsoring organization. The largest category of group life consumers is Choose one answer. A. Foundation groups. B. Church groups. C. Student groups. D. Employer groups.

D. C Incorrect. Employers represent the largest category covered by group insurance and consist of individual employees or can be multi-employer arrangements.

The Inflation Guard endorsement gradually and automatically increases limits throughout the policy period in homeowners policies for Coverage(s) Choose one answer. A. A only. B. A and B only. C. A, B, and C only. D. A, B, C, and D.

D. C Incorrect. The endorsement provides an automatic increase in the amount of each of the Section I—Property coverages.

A business wishes to cap large insurance claims of a given business unit when evaluating the annual results of that unit. This would be an example of which one of the following accounting frameworks? Choose one answer. A. Generally accepted accounting principles B. Regulatory/supervisory accounting C. Tax accounting D. Management accounting

D. Page 1.8 book 1

Jack is a scuba diving instructor, which is a dangerous occupation. Jack applies for a life insurance policy and lists his occupation as "marine administrator," a much safer occupation. Five years after the policy is issued, Jack is accidentally killed in a scuba diving accident. At this time, the insurer learns of Jack's real occupation and denies the claim under Jack's policy due to fraud and material misrepresentation. Jack's insurer would not have issued the policy if it had known Jack's real occupation. The policy had a two-year incontestable clause. Assuming that the policy has no occupational restriction, is the insurer's denial of the claim under Jack's policy proper? Choose one answer. A. Yes—based on Jack's fraud and material misrepresentation B. Yes—based on the suicide clause C. No—based on the misstatement of age and gender clause D. No—based on the incontestable clause

D. A Incorrect. After the period stated in the incontestable clause, in this case two years, the insurer loses the right to challenge the validity of the contract, even for most types of fraud. Some policies deny coverage for specifically stated occupations, but this policy has no occupational restriction.

Which one of the following would be excluded under Coverage B—Personal and Advertising Injury Liability of the Commercial General Liability (CGL) policy? Choose one answer. A. The use of another's advertising idea in the insured's advertisement B. Written publication of material that violates a person's right of privacy C. Malicious prosecution D. An offense committed by an insured whose business is broadcasting

D. A. Incorrect. This is covered under Coverage B of the CGL.

Under the HO-3—Special Form (HO-3) Section I—Conditions, the Loss Payment condition Choose one answer. A. Establishes how the amount to be paid for a property loss will be determined. B. Outlines a method for resolving disagreements between the insured and the insurer. C. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it. D. States that the insurer will adjust all losses with the insured or the insured's spouse (unless another person is named in the policy or is legally entitled to receive payment).

D. A. Incorrect. Under the HO-3 policy Section I—Conditions, the Loss Payment condition states that the insurer will adjust all losses with the insured or the insured's spouse(unless another person is named in the policy or is legally entitled to receive payment). Loss Settlement the process to determine the amount to be paid for a property loss

Which one of the following is a defense to libel and slander? Choose one answer. A. Absolute knowledge B. Valid information C. Unconditional privilege D. Retraction

D. B Incorrect. A retraction printed after a defamatory statement has been made is not a complete defense; however, it may minimize the damage to the plaintiff's reputation therefore lowering a compensatory damage award.

Professional liability for professions such as accounting, insurance, law, and engineering is often called which one of the following? Choose one answer. A. Negligence liability B. Malpractice liability C. Fiduciary liability D. Errors and omissions liability

D. B Incorrect. Professional liability for professions such as accounting, insurance, law, and engineering is also known as errors and omissions liability.

Additional case reserves are most common for which one of the following types of claims? Choose one answer. A. Claims for reserve liabilities. B. Claims for positive reserve amounts. C. Claims for salvage recoveries. D. Claims under assumed reinsurance contracts

D. Page 1.45

Which one of the following has the types of rate regulation listed in order from least stringent oversight to most stringent? Choose one answer. A. Prior approval, use and file, open competition B. Open competition, government-mandated, prior approval C. Open competition, use and file, file and use D. Open competition, use and file, prior approval

D. C Incorrect. Open competition, use and file, prior approval

Which one of the following is true regarding maintaining insurer solvency? Choose one answer. A. All insurers rely on the same reinsurers to provide backing for the risks they cover. B. When one insurer becomes insolvent, they all become insolvent within a short time period. C. Rates are developed based on the experience of all insurers, including those that become insolvent. D. Other insurers may be required to contribute funds to help pay an insolvent insurer's obligations.

D. C Incorrect. Other insurers may be required to contribute funds to help pay an insolvent insurer's obligations.

Which one of the following elements must exist in order to prove fraud? Choose one answer. A. A representation, whether true or untrue, that was made maliciously. B. A representation that was related to a past, existing, or future fact. C. The plaintiff may or may not have acted anyway, but the representation influenced the decision. D. The intent of the representation was to deceive the plaintiff into acting

D. C Incorrect. The intent of the representation was to deceive the plaintiff into acting.

Ian, Isaac, and Ann each own car repair shops. They are defendants in a lawsuit alleging that they were cheating customers and causing vehicle engine problems by utilizing very specific processes in their service shops. The plaintiff Nick is accusing all three defendants since it is unclear which of the defendants actually caused the problems with Nick's vehicle. Ian, Isaac and Ann must each prove that he or she did not cause the harm or that someone else did. This concept is known as Choose one answer. A. Concert of action. B. Industry-wide liability. C. Conspiracy. D. Alternative liability.

D. C Incorrect. This is not concert of action or conspiracy since Ian, Isaac, and Ann did not work together in any way to cause the problems with Nick's vehicle.

An HO-4—Contents Broad Form (HO-4) includes building additions and alterations coverage up to 10 percent of the limit of Coverage C—Personal Property. Which one of the following individuals would typically benefit from this coverage? Choose one answer. A. An owner of an older house with obsolete construction B. An owner of a single family home who has installed wheelchair ramps at the doors of her home to accommodate her wheelchair C. A condominium unit owner who renovates the kitchen and installs more expensive cabinets than were originally in the unit D. An apartment dweller who has installed a power-lift chair at the stairway inside his two-story unit

D. C. Incorrect. The apartment dweller who has installed a power-lift chair would benefit. The HO-4 is typically a renters policy. Even though a tenant may have no insurable interest in the apartment building, there is an insurable interest in installations which, if damaged, would be a loss to the tenant. C owner installed the power-lift chair, which is not an interest of the tenant

Under Coverage C—Personal Property of the homeowners policy, which one of the following statements is true? Choose one answer. A. Loss caused by smoke from agricultural smudging or industrial operations is covered under Coverage C. B. Theft from a building under construction and theft of construction materials are covered under Coverage C. C. Theft is included under Coverage C for watercraft, including its furnishings and equipment, away from the residence premises. D. Windstorm or hail damage to personal property is not covered unless the building is first damaged.

D. C. Incorrect. Windstorm or hail damage to personal property is not covered unless the building is first damaged.

Which one of the following statements is true regarding endorsements and other related documents? Choose one answer. A. Endorsement provisions do not differ from basic policy provisions because of the need for standardized language. B. Because of statutory and regulatory constraints, an insurance policy may not incorporate other documents in addition to policy forms. C. The insurer usually does not need to keep the completed insurance application because similar information may be found in the declarations page. D. In certain circumstances, the insurer's bylaws are incorporated into an insurance policy.

D. Correct. In certain circumstances, the insurer's bylaws are incorporated into an insurance policy. A. Endorsement provisions often differ from basic policy provisions. 2.15

A court would most likely order specific performance for which one of the following purposes? Choose one answer. A. To order a doctor to perform surgery B. To compensate an injured party C. To compel a party to refrain from trespassing D. To require the release of information

D. C Incorrect. A court would most likely order specific performance to require the release of information. Special performance is used to compel a party to act; injunction is used to compel a party not to act

Professional liability insurance is now available for more than just the technical professions. These occupations range from chemists to veterinarians, all of which entail liability for which one of the following? Choose one answer. A. Failure to act in the manner of a "reasonable person" when performing skills related to the chosen profession B. Gross and wanton negligence on the part of the professional C. Advertising injury due to failure to render professional services D. Failure to use the degree of skill expected of a person in a particular field

D. 12.10 A Incorrect. The liability is for failure to use the degree of skill expected of a person in a particular profession.

Which one of the following statements is true regarding the insured's or insurer's right to transfer insurance policies? Choose one answer. A. Insurance policies typically contain conditions allowing insureds to transfer the policy to a third party without the insurer's approval. B. Under state law, insurers may not transfer policies to other insurers. C. Insurance policies typically contain conditions prohibiting an insurer from transferring the policy to a third party. D. An insurer can transfer all of its business if it is acquired by another insurer.

D. 2.10 C Incorrect. An insurer can transfer all of its business if it is acquired by another insurer.

Which one of the following best describes the U.S. GAAP accounting treatment of ceded loss reserves on an insurer's balance sheet? Choose one answer. A. Ceded loss reserves are treated as a liability. B. Ceded loss reserves are treated as an offset to a liability. C. Ceded loss reserves only appear on the income statement. D. Ceded loss reserves are treated as an asset.

D. Page 1.55 Example.

Ella, the owner of a dry cleaning establishment, maintains insurance on customers' clothing and other property. She does so because she is acting as a bailee of cutomers' property while it is in her possession. In the event that a customer's property becomes damaged while in her care, Ella will pay any insurance proceeds to the customer. Which one of the following is the legal basis for insurable interest demonstrated by this example? Choose one answer. A. Factual expectancy B. Ownership interest in property C. Contractual obligation D. Representation of another party

D. 3.6 Representation of Another Party 3 examples: 1. Agents 2. Trustees 3. Bailees C. Incorrect. The legal basis for insurable interest demonstrated by this example is representation of another party.

Corporation X, in an attempt to accrue more profits, used harmful ingredients in a beverage product to enhance taste, boost sales, and save on expenses. As a result many children were sickened and a class action lawsuit resulted in the court awarding punitive damages. To assess punitive damages in this case, the court will usually consider which one of the following factors? Choose one answer. A. Actual proof of malice B. Size of the plaintiff's assets C. Maximum allowable state limit for punitive damage D. Nature of the defendant's actions

D. B should be size of the defendants actions B Incorrect. The court would not be as concerned about actual proof of malice, or the monetary issues as it would be concerned about the nature of the defendant's actions and the resulting harm or injuries.

Which one of the following types of overlaps in coverage is usually the most difficult to resolve? Choose one answer. A. Other insurance in a similar policy B. Noninsurance agreements C. Other insurance in the same policy D. Other insurance in dissimilar policies

D. Correct. Because of the typical lack of provisions governing coordination of coverage for dissimilar policies, these types of overlaps in coverage are often the most difficult to resolve. Page 3.33 What are examples of noninsurance agreements? 1. A lease agreement might make a tenant responsible for damage to leased property that is also covered by insurance 2. Credit card rental car PD protection duplicating APD 3. Credit card protection for purchased property may overlap with HO policy. 4. Extended auto/home warranty overlap with HO policy

Which one of the following is a tort involving use or disclosure of information? Choose one answer. A. Publicly placing plaintiff in a false light B. Public disclosure of facts C. Unauthorized use of information D. Appropriation of plaintiff's name or likeness

D. Only this one full name matches... 13.31 A Incorrect. The tort of appropriation of plaintiff's name or likeness is a tort based on one's rights to one's own name and likeness.

A premium deficiency reserve is established for which one of the following reasons? Choose one answer. A. To avoid performing a liability adequacy test B. To recognize the effect of inflation on reserves C. To offset future earnings from paid losses at the end of a multiyear policy term reported in financial statements D. To prevent a bias in financial statements toward a future earnings loss from the liability runoff

D. Page 1.41 *Most accounting frameworks find the booking of a liability that is expected to be insufficient almost totally unacceptable; however, ...accept the booking ... to be excessive* *aka, if this calculation results in a zero or negative value, no liability is established*

Like auto liability insurance, aircraft liability coverage is usually not subject to which one of the following? Choose one answer. A. A coinsurance clause B. Excess limits or policy sub-limits C. A small deductible D. An aggregate limit

D. Page 12.23 A Incorrect. Aircraft liability coverage is usually not subject to an aggregate limit.

Which one of the following types of insurance policies is least likely to be considered a contract of adhesion? Choose one answer. A. A commercial crime policy B. A personal articles floater C. An automobile policy D. A manuscript policy

D. Page 2.8 B Incorrect. A manuscript policy

Larry drove his car and was involved in a two-car accident caused by the other driver, who was uninsured. The at-fault driver offered Larry a substantial amount of money in satisfaction of his damages. Larry accepted the money in settlement of his losses and released the other driver from further liability. Larry later submitted an uninsured motorists claim under his Personal Auto Policy (PAP). The uninsured motorists claim would be Choose one answer. A. Paid for damages accruing after the settlement with the at-fault driver. B. Paid in addition to the money paid by the at-fault driver. C. Denied because the at-fault driver can be considered self-insured under the circumstances. D. Denied because coverage under these circumstances is excluded.

D. Page 4.44 Prejudice means to injure or damage another party's right A. Incorrect. Denied because coverage under these circumstances is excluded.

The standard limit for Coverage C of the HO-3—Special Form (HO-3) policy is Choose one answer. A. 10 percent of the Coverage A limit. B. 25 percent of the Coverage A limit. C. 30 percent of the Coverage A limit. D. 50 percent of the Coverage A limit.

D. Page 6.13 A Incorrect. The standard limit for Coverage C of the HO-3 policy is 50 percent of the Coverage A limit.

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form's (BPP) coverage for personal property of others? Choose one answer. A. The BPP specifically excludes coverage for businesses (bailees) that have customers' property in their custody, such as laundries, dry cleaners, appliance repair shops, and furniture upholstery shops. B. Coverage for personal property of others applies only if the insured is legally responsible for the damage. C. The BPP covers personal property of others while it is located anywhere in the world. D. Even if the insured does not buy coverage for personal property of others the BPP still provides a coverage extension for personal property of others, which is limited to $2,500 at each insured location.

D. Page 8.10 B Incorrect. Coverage applies whether the insured is legally responsible or not.

Insurers underwrite Agreed Value optional coverage carefully for which one of the following reasons? Choose one answer. A. The insurer is obliged to pay the ACV of the damaged property, regardless of the limit of insurance purchased. B. Claims settlements under agreed value policies are typically higher than those under policies that include an 80 percent coinsurance clause. C. If the Agreed Value coverage option is not renewed, the coinsurance condition cannot be reinstated. D. Insureds are often tempted to underinsure, knowing they will not suffer a coinsurance penalty when the agreed value option is in effect.

D. Page 9.9. B Incorrect. Because most losses are partial, insureds are often tempted to underinsure, knowing they will not suffer a coinsurance penalty when the agreed value option is in effect. Therefore, insurers underwrite agreed value carefully.

Under U.S. regulatory accounting, the liability for extended reporting endorsements covering a definite period into the future is recorded as Choose one answer. A. Loss reserves. B. Written premium. C. Earned premium. D. Unearned premium reserves.

D. See page 1.36 or notes For definite period - unearned premium reserves For indefinite period - loss reserves A Incorrect. Under U.S. regulatory accounting, the liability for extended reporting endorsements covering a definite period into the future is recorded as unearned premium reserves.

Ren was married to Anna but they have since divorced. Because Ren is aware of Anna's financial status, he wants to take out a life insurance policy on her. In terms of insurable interest, Ren may Choose one answer. A. Purchase a life insurance policy on Anna but it cannot exceed one half of Anna's net worth. B. Purchase a life insurance policy on Anna with any face amount. C. Not purchase a life insurance policy on Anna since he has no right to her assets after the divorce. D. Not purchase a life insurance policy on Anna since he does not have an insurable interest in her life.

D. The question only ask about the insurable interest. B Incorrect. Ren may not purchase a life insurance policy on Anna since he does not have an insurable interest in her life.

Coverage under Coverage B—Other Structures of an HO-3—Special Form (HO-3) policy applies to which one of the following? Choose one answer. A. Personal property that is within the insured dwelling B. A separate structure on the insured premises from which the insured operates a business C. A detached garage that has an apartment that is rented to a local college student D. A detached garage rented to the named insured's neighbor who uses it to store one of his vehicles

D. a structure rented to anyone who is not a resident of the dwelling will not be covered *unless it is rented as a private garage* B Incorrect. Coverage under Coverage B—Other Structures of an HO-3 policy applies to a detached garage rented to the named insured's neighbor who uses it to store one of his vehicles.

Cathy left a bracelet at a jeweler for repair and was given a receipt with the statement, "This establishment is not responsible for loss or damage to any item left in its possession." What does the statement on the receipt represent? a. Assumption of risk b. Hold harmless agreement c. Comparative negligence d. Release of liability

D. is correct What is hold harmless agreement?

Which one of the following statements is correct regarding sources of recovery under insurance policies? Choose one answer. A. An insured cannot simultaneously hold two policies of the same type with two different insurers. B. If an insured's loss is covered under two similar policies, the policy that was issued first must pay the loss. C. Policy provisions generally exclude coverage for items covered under a policy with another insurer. D. In situations involving a loss covered by two similar policies with different insurers, the insurers usually share the loss.

D. is correct. C. Incorrect. In situations involving a loss covered by two similar policies with different insurers, the insurers usually share the loss. Page 3.32

Homeowner Stan is told by an arborist that a dead tree is going to fall on his house and must be removed. Knowing his insurer would indemnify him for the damge to the house, Stan chose to do nothing. Which one of the following statements regarding Stan's decision is accurate? a. If the tree damages Stan's property, it will not be a fortuitous loss. b. Stan is guilty of adverse selection since he is aware of the hazard. c. Stan is defrauding his insurer. d. The insurer may deny coverage based on Stan's material misrepresentation of the potential hazard.

a is correct d is wrong

Charlotte, Chloe, and Jessica have concurrent ownership in a restaurant, each owning one third. Their combined interests equal the value of the restaurant. If one of them should die, her share would pass to her heirs. This type of ownership is referred to as a. Joint tenancy. b. Tenancy in common. c. Tenancy by partnership. d. Tenancy by entirety.

b. d is wrong

Mike and Leona own a single-family home insured to value under an HO-3—Special Form (HO-3) with a limit of $350,000 for the Coverage A—Dwelling. While they were out to dinner one evening, an electrical fire started in the kitchen, destroying the kitchen and part of their bedroom on the second floor. The fire destroyed the contents of the bedroom and the clothing in their closets, as well as Leona's jewelry valued at $5,000 and a fur coat valued at $2,000. Ignoring any deductible that may apply, how much coverage is provided for the jewelry and fur coat? a. $1,500 b. $2,000 c. $5,000 d. $7,000

d c is wrong. Only theft has sublimits: jewelry 1500, fur 1500, firearm 2500, silver 2500