Exam 6
When would an insured's PAP liability coverage provide excess liability coverage? Answer Choices: Select the Correct Answer A person borrows a friend's vehicle to travel to the airport and has an at fault accident. A person uses his car to transport his coworkers. A person transports people in his vehicle from the airport to nearby hotels for a fee. A person drives his car into Canada
A person borrows a friend's vehicle to travel to the airport and has an at fault accident. is correct. Explanation: PAP Liability coverage is excess for insureds driving non-owned autos. This provision would not apply to a furnished automobile, like a company car.
What does the term "unvalued basis" mean as it relates to ocean marine hull insurance? Answer Choices: Select the Correct Answer A policy wherein the amount of coverage is stated A policy designed to cover open lands A policy where the value is not declared until after the loss A policy where the value is determined by the exposure
A policy where the value is not declared until after the loss is correct. Explanation: This is a policy where the value of the property is not declared until after the loss. Some forms of ocean marine hull coverage are written on this basis.
The type of bond premium paid for under the Personal Automobile Supplementary Payments is: Answer Choices: Select the Correct Answer An appeal bond A bail bond A release attachment bond All of the responses are correct.
All of the responses are correct. is correct. Explanation: Supplementary payments pay for the premium on appeal bonds and bonds to release attachments without a specific limit. The policy also provides for the payment of the cost of a bail bond required because of an accident up to $250.
Al has an umbrella liability policy which does not pay damages until such time as Al is legally obligated to pay them. This type of policy is known as: Answer Choices: Select the Correct Answer A reimbursement policy. A pay-on-behalf-of policy. An indemnification policy. An obligation policy.
An indemnification policy.. Explanation: Most insurance contracts are indemnification policies.
Which of the following statements concerning installation floaters is not true? Answer Choices: Select the Correct Answer The form covers property sold by the insured and transported to another location to be installed. Coverage is written on a named perils basis only. "Hoisting" coverage is a feature often written into Installation Floaters. Coverage may be written on a monthly reporting basis.
Coverage is written on a named perils basis only. is correct. Explanation: Usually coverage is written on an "all risk" basis
Which of the following statement is true of the jewelers block coverage form? Answer Choices: Select the Correct Answer The form insures a package of property and liability coverage. Coverage may be written for the stock for retail jewelers or the jewelry stock of department and discount stores. Coverage may be written for pawnbrokers dealing in jewelry. Customers' property is not covered under the form.
Coverage may be written for the stock for retail jewelers or the jewelry stock of department and discount stores. is correct. Explanation: This form is used for retail jewelers or the jewelry of department and discount stores. The commercial property forms as well as the BOP contain a theft limitation for jewelry and therefore create the need for the jewelers block policy.
Which of the following would not be eligible for coverage under a livestock floater? Answer Choices: Select the Correct Answer Poultry Cattle Sheep Swine
Poultry. Explanation: Poultry is not eligible property under the livestock floater.
Stephen has a Personal Auto Policy with Liability limits of $25/50/25. He strikes a car with four occupants from Ohio, all of whom are injured. The first sues for $20,000, the second sues for $35,000, the third sues for $22,000, and the fourth sues for $18,000. The car Stephen hit has $8,000 in damage. The company spends $20,000 on a law firm for defense. Ignoring any PIP or Med Pay coverage, what is the total cost to the company for the claim? Answer Choices: Select the Correct Answer $50,000 $70,000 $78,000 $90,000
The correct answer is: $78,000. Explanation: First, the most that can be paid for any one injury is $25,000. Secondly, the most that can be paid for all of the multiple injuries is the limit of $50,000. The policy will pay the $50,000 plus the $8,000 for the property damage and the defense costs of $20,000 for a total of $78,000.
Coinsurance does not apply when: Answer Choices: Select the Correct Answer All structures on the property are insured The insured suffers a total loss of the property The insured suffers a partial loss of the property All of the responses are correct
The insured suffers a total loss of the property. Explanation: Coinsurance does not apply to total losses. The clause is activated when a partial loss occurs and the insured has not complied with the coinsurance clause.
The term "time element coverage" or "restoration period" is used when the amount of loss depends on: Answer Choices: Select the Correct Answer The time it takes to repair, rebuild or restore damaged property. The time between the effective date and date of loss. The time between the date of loss and expiration date. The time of year when a seasonal business suffers a loss.
The time it takes to repair, rebuild or restore damaged property. is correct. Explanation: This is called the restoration period.
In commercial property coverage, the Utility Service - Time Element Coverage Endorsement covers loss due to the interruption of all of the following, EXCEPT: Answer Choices: Select the Correct Answer Transportation. Power. Water. Communication.
Transportation. is correct. Explanation: Loss due to transportation is not a covered loss under this endorsement.
Which of the following is not excluded under Section II-Liability of the BOP? Answer Choices: Select the Correct Answer Aircraft, auto or watercraft bodily injury Professional services bodily injury Pollution property damage Valet parking bodily injury
Valet parking bodily injury is correct. Explanation: Coverage is included for valet parking bodily injury claims. However, the coverage only applies to the ways and means of the insured's premises that are owned or rented. The vehicle must be one that is not owned, rented or loaned to the insured. Coverage is the same in the general liability form.
A tenant leases space in a building. The tenant's space is damaged by fire. When will the commercial Property Policy pay for the damage? Answer Choices: Select the Correct Answer When the owner of the building submits proof of loss for the damage If the Tenant pays for the damage Will only pay if the lease agreement charges the tenant with the repairs Will not pay
When the owner of the building submits proof of loss for the damage . Explanation: When the owner of the building submits proof of loss for the damage and the loss is paid.
Which of the following pollution losses would be covered under the garage liability policy? I. Escape of toxic sludge from a dump site the named insured utilizes to store garage waste. II. Pollution of a creek caused by gasoline leaking from the ruptured fuel tank of a truck following a collision with another vehicle. Answer Choices: Select the Correct Answer II only. I only. Neither I nor II. Both I and II.
Your answer: II only. is correct. Explanation: Only escaped pollutants that are needed for the proper operation of the vehicle (such as fuel, oil, or battery) are covered.
If an insured takes precautionary measures to protect property from flood damage such as creating a retaining wall of sand bags, how much coverage if any, will be provided by a flood policy? Answer Choices: Select the Correct Answer $1,000 if the flood is imminent and the property is in danger of flooding. No coverage at all. $2,500 but only if the insured provides receipts prior to the flooding. None of the the responses listed are correct.
$1,000 if the flood is imminent and the property is in danger of flooding.. Explanation: The policy will provide additional coverage up to $1,000 for preventative measures taken to prevent the property from an imminent flood loss. This $1,000 however will be subtracted from the policy limit covering any property that may be damaged by the imminent flood.
A surplus lines broker in Alabama must file a bond in the amount of: Answer Choices: Select the Correct Answer $50,000. $100,000. $25,000. $10,000.
$50,000. is correct. Explanation: $50,000 is the amount required by law.
Upon written demand by a person aggrieved, the Commissioner must hold a hearing within ___ of receipt of the demand. Answer Choices: Select the Correct Answer 30 days. 10 days. 3 months. 14 days.
30 days. is correct. Explanation: By state law, a hearing must be held within 30 days.
The standard deductible on the Earthquake Causes of Loss form is:
A percentage of the building value.. Explanation: The deductible will be the percentage shown in the declarations times the limit of insurance for each type of covered property
Which of the following Commercial Inland Marine coverage forms covers payments that are due to the insured from customers when these payments cannot be collected due to loss or damage of records? Answer Choices: Select the Correct Answer Accounts Receivable Equipment Dealers Electronic Data Processing Valuable Papers and Records
Accounts Receivable is correct. Explanation: The purpose of accounts receivable coverage is to protect the insured when their records have been destroyed or damaged by a peril insured against. It pays to reconstruct the records and it also pays for the losses sustained by the insured due to the destruction of the accounts receivable records.
Under a surety bond, the "principal" is the party that: Answer Choices: Select the Correct Answer Agrees to fulfill an obligation. Agrees to pay damages if default occurs Provides the bond in exchange for a fee. Will be paid damages if default occurs.
Agrees to fulfill an obligation. . Explanation: The bond guarantees the performance of the principal. A building contractor would be an example of a principal under a performance bond.
Two weeks after Paul's Perfect Pipe Plumbing repaired the toilet at Dan's house, the water feed line that was incorrectly installed, breaks and water ruins the walls, carpet and sub-flooring in Dan's home. Dan makes a claim for damages. How will Paul's CGL respond? Answer Choices: Select the Correct Answer The CGL will pay for all of the damage caused by the water. The CGL will not pay to correctly reinstall the water feed line. Both answer choices are correct. Neither answer choices are correct.
Both answer choices are correct. is correct. Explanation: The Completed Operations hazard of the CGL will pay for all of the damage caused by the water but will not pay the cost to reinstall the pipe as this was Paul's work.
All of the following are exclusions under Section I of the HO-2 and HO-3, EXCEPT: Answer Choices: Select the Correct Answer Collapse. Ordinance or law. Power failure. Earth movement.
Collapse. . Explanation: Collapse is included in the HO-2 and HO-3 forms. The other three responses are excluded under all the HO forms.
Fidelity bonds which apply coverage to an employee or employees acting in collusion with others are called: Answer Choices: Select the Correct Answer Commercial blanket bonds. Scheduled bonds. Position bonds. Blanket position bonds.
Commercial blanket bonds. . Explanation: The commercial blanket bond's limit applies separately to each employee involved in the loss whether acting alone or in collusion with other employees. However, in case of a loss only the bond limit will apply to the entire loss.
Which of the following prevents someone from collecting payment for negligence under the laws of some states? Contributory Negligence Compensative Negligence
Contributory Negligence
Which of the following endorsements can be used under the BAP to extend coverage to individuals such as the owner of the business who does not carry personal auto insurance? Answer Choices: Select the Correct Answer Drive other car coverage. Named non-owned auto endorsement. Broad form named non-owned auto endorsement. Drive away liability coverage.
Drive other car coverage. . Explanation: The purpose of this endorsement is to provide coverage for the owner of a business that does not own an auto. The coverage includes driving a non-owned auto.
Under the BOP which of the following losses is not subject to a waiting period due the shutdown of the business due to the acts of a civil authority? Answer Choices: Select the Correct Answer Business Income Extra Expense Extended Business Income Contingent Business Income
Extra Expense. Explanation: Under the newer BOP forms, if a civil authority action renders the business inaccessible due to loss of property at other than the insured's location, any extra expenses incurred are not subject to the normal 72 hour waiting period for business income. Coverage is available for up to 4 weeks or when the civil authority business income coverage ends, whichever is later. The older forms offered three weeks of coverage.
An insured purchased business auto physical damage coverage against specified causes of loss. Protection applies to all of the following perils, except: Fire Theft Falling Objects Vandalism
Falling Objects This is named peril coverage and is not nearly as broad as comprehensive coverage. This coverage form names the perils which will be covered and falling objects is not a named peril. Comprehensive covers anything other than collision.
The homeowner policy provides "special limits" of coverage for certain types of personal property, regardless of the cause of loss. Which of the following is NOT included under these "special limits" except for the peril of theft?
Furs.
Upon discovering that an agent may have violated an insurance law, the state insurance department is required to take which of the following actions? Answer Choices: Select the Correct Answer Hold a hearing on the infraction Place the licensee on probation immediately Publish notice of the violation Revoke the agent's license
Hold a hearing on the infraction is correct. Explanation: In most states, the head of the state's insurance department will hold a hearing and subpoena witnesses regarding a possible violation of insurance law. The agent would have the opportunity to present his or her side of the case at that the hearing. After the hearing is completed, the department head will issue an order/conclusion (similar to a verdict in a criminal case).
Which of the following are are essential if a salvage award is to be made? I. The property involved must be in peril from some hazard. II. The salvage service must be voluntary. III. The effort must be successful. Answer Choices: Select the Correct Answer I and III only I and II only I, II and III II and III only
I, II and III is correct. Explanation: All of these are essential if a salvage award is to be made.
The Fit and Trim Fitness Center wants to reduce its carbon footprint. A covered loss destroys some treadmills, damages the roof and most of the interior walls. Fit and Trim finds replacement treadmills that generate and actually return energy to the power grid. The cost is 15% higher than standard equipment. Which of the following, if any, would pay the increase? Answer Choices: Select the Correct Answer Ordinance and Law Coverage Fungi, Wet and Dry Rot Increased cost of loss and related expenses for "green" updates Consequential Loss Coverage
Increased cost of loss and related expenses for "green" updates. Explanation: The increased cost of loss and related expenses for green updates will pay an extra 25% of the property loss for the increased cost to "go green" up to $100,000 maximum.
Medical payments coverage under the farmowners policy covers which of the following? Answer Choices: Select the Correct Answer Injuries sustained by an invitee Injuries sustained by a farm employee Injuries sustained by the insured Injuries sustained by a tenant living in the insured's dwelling
Injuries sustained by an invitee is correct. Explanation: Medical payments would pay for the injuries sustained by an invitee or guest. Coverage does not apply to members of the insured's family, roomers or boarders or tenants of the dwelling, or to farm employees.
Which of the following would be covered under the "Other Than Collision" coverage of a personal auto policy?
Lightning
The limit of a bond is known as its:
Penalty
Under the Equipment Breakdown Protection form that covers boilers and machinery, what is considered to be one loss event? Answer Choices: Select the Correct Answer The initial breakdown causes other breakdowns A boiler explodes in a building not owned by the insured adjacent to his. Three separate losses occur during the week When expediting expenses are paid
The initial breakdown causes other breakdowns is correct. Explanation: The breakdown of one covered piece of equipment that causes other breakdowns of covered equipment will be considered one event.
Under pollution clean up and removal coverage under the BOP, when must a loss be reported? Immediately within 180 days within 90 days within 30 days
within 180 days
The Alabama Insurance Guaranty Association is obligated to pay any covered claim that is over $100 and less than: Answer Choices: Select the Correct Answer $150,000. $100,000. $50,000. $300,000.
$150,000.. Explanation: The Guaranty Association is obligated for up to $150,000.
What is the percentage of coverage for the "loss of use" under an HO-3 form? Answer Choices: Select the Correct Answer 30% 20% 25% 10%
30%. Explanation: The percentage of Coverage A for loss of use is 30%.
Mr. Jones could be covered under Liability Coverage section of the Personal Auto Policy for only one of the following vehicles. Which one is it? Answer Choices: Select the Correct Answer A taxi cab His pick-up truck when it is rented to a neighbor His family car when being used in car pool A limousine he rents out for weddings and special occasions
His family car when being used in car pool is correct. Explanation: The only one that is covered is the family car while being used in a car pool
Which of the following types of property may not be insured under the valuable papers and records coverage form? Answer Choices: Select the Correct Answer Money and securities Books, maps, and film Property of others Mortgages and manuscripts
Money and securities. Explanation: Money and securities is crime coverage and these items are not covered by the valuable papers and records coverage form.
Which of the following is not considered to be property insurance "indirect loss" coverage?
Replacement Cost Coverage. Explanation: An indirect loss, sometimes called a consequential loss, occurs as the result of a direct loss to the insured property. Replacement cost coverage is used to determine the amount of the loss.
Which of the following losses would be paid under the "other than collision" coverage of the Personal Auto Policy Answer Choices: Select the Correct Answer Gradual corrosion of the grillwork on the insured automobile due to continuous exposure to salty air The insured automobile was stolen and never recovered. The insured automobile skidded on icy pavement and overturned. The insured automobile was damaged when it hit by another car failing to stop at a red traffic light.
The insured automobile was stolen and never recovered. is correct. Explanation: Comprehensive coverage provides theft coverage including damages that occur as a result of the theft.
Henry is the first named insured on a $1 million umbrella liability policy. His wife, Dorothy, is also an insured. Both Henry and Dorothy were sued for $1 million in separate, unrelated suits by separate third parties. Both insureds lost their suits on the same day. In this possible but rare situation, if the umbrella policy is applicable and the self-insured retention is not applicable: Answer Choices: Select the Correct Answer Henry will receive more protection from the policy than Dorothy because he is the first named insured. The policy will pay $500,000 toward each award. The policy will only honor Henry's claim. Henry will not receive more protection than Dorothy and the policy could pay a total of the $2 million amount for the two awards, subject to the "aggregate limit".
aggregate limit
Requirements that truckers be financially responsible for cargo they carry are imposed by: Answer Choices: Select the Correct Answer The federal government. State government. City and county governments. Both state and federal governments.
both
A personal auto policy provides liability coverage on a single limit basis for $100,000. A covered accident caused by Mr. Jones involves a $75,000 liability judgment to Mr. Allen for his injuries and $25,000 liability judgment for his car. In addition, $20,000 in legal bills are incurred defending the insured. The company will pay: Answer Choices: Select the Correct Answer $120,000. $25,000. $75,000. $100,000.
$120,000. is correct. Explanation: Legal expenses are in addition to the limit of liability. The single limit covers both bodily injury and property damage liability. Therefore, the policy can pay the $120,000.
Jerry's car is involved in an accident. He has collision coverage. The car is not driveable. How much, if any, can he collect for his transportation expenses from the policy?
$20 per day after a 24 hour waiting period. Explanation: Transportation expenses are an additional coverage if the insured has purchased collision and/or other then collision coverage. $20 per day up to $600 is available. Coverage begins 48 hours after a theft loss and 24 hours for any other covered loss.
The newer commercial auto form includes changes to the transportation coverage. The coverage now pays _____ per day for up to a maximum of: Answer Choices: Select the Correct Answer $20/$600. $15/$450. $30/$600. $35/$500.
$20/$600. is correct. Explanation: The new change increases the coverage to $20 per day (an increase from $15) to a maximum of $600, (an increase from $450).
A covered auto requires $700 in repairs because of damage done by a limb from a dead tree that fell on it. The auto's BAP coverage has a $100 comprehensive deducible and a $250 collision deductible. Assuming that the ACV and replacement cost of the vehicle is $700, the insurer will pay: Answer Choices: Select the Correct Answer $0. $450. $600. $700.
$600. is correct. Explanation: Falling objects is a comprehensive loss and the deductible of $100.00 would apply.
Under a personal articles floater, a pair of antique salt and pepper shakers are insured for $1,000. When one of the shakers is broken, the remaining shaker is worth only $200. How much will the insured receive for the loss? Answer Choices: Select the Correct Answer $800. $1,000. $500. $200.
$800. is correct. Explanation: Under the "pair and set clause" the insured will not receive the value of the entire set in case one is lost or destroyed. Payment is made by deducting the value of the remaining portion of the set from the limit of insurance and paying the difference.
What is the limit of coverage provided under a mobile home policy for detached structures? Answer Choices: Select the Correct Answer $2,000 10% of the Coverage A limit or $2,000 whichever is greater $5,000 per structure Coverage must be added by endorsement
10% of the Coverage A limit or $2,000 whichever is greater is correct. Explanation: The limit is $2,000 or 10% of the Coverage A (dwelling limit), whichever is greater
To be licensed as an adjuster in Alabama, an applicant must be ___ years of age when making application. Answer Choices: Select the Correct Answer 19 18 21 25
19
Motels insured under the BOP may not exceed how many stories? Answer Choices: Select the Correct Answer 3 stories 4 stories 5 stories No limit
3 stories is correct. Explanation: Motels not exceeding three stories may be insured. There is no floor area restriction. Motels closed for more than 30 days are not eligible.
An Alabama producer must keep complete records pertaining to transactions under his or her license for at least:
3 years
If any person engages in activities in violation of the Federal Insurance Fraud and False Statements regulation, he or she may be subject to a civil penalty of up to: Answer Choices: Select the Correct Answer A civil penalty of not more than $50,000. A penalty as determined by the state insurance commissioner. A penalty of up to $5,000. A penalty of $500.
A civil penalty of not more than $50,000.. Explanation: The United States Attorney General may bring a civil action in the appropriate United States district court against any person who engages in any of these crimes and that person will be subject to a civil penalty of not more than $50,000 for each violation or the amount of compensation which the person received or offered for the prohibited conduct, whichever amount is greater.
Which of the following "home businesses" are not eligible for the home business insurance endorsement to a homeowner policy? Answer Choices: Select the Correct Answer A corporation An accountant's office A craft school An acceptable business that generates less than $250,000 in receipts
A corporation is correct. Explanation: The form may not be used to cover the exposures of corporations. It is used to cover a variety of home businesses which must be owned by the named insured, or by a partnership, joint venture, or organization comprised solely of the named insured and resident relatives
Which of the following would be considered an automobile comprehensive (other than collision) claim? Answer Choices: Select the Correct Answer A shopping cart hitting the vehicle A load of bricks falling from an apartment building onto the car A hit and run driver striking the vehicle An uninsured motorist colliding with the vehicle
A load of bricks falling from an apartment building onto the car. Explanation: A load of bricks falling onto the vehicle would be an "other than a collision" loss. This would be considered a falling objects claim. The others are considered collision losses. The term "comprehensive" is used in commercial auto coverage and the term "other than collision"is used in personal auto coverage. The coverage is the same.
Under the discovery clause in the loss sustained policy, which of the following is covered? Answer Choices: Select the Correct Answer A loss discovered up to one year after the policy expired but that occurred during the policy period A loss that is discovered two years after the policy has expired A loss that occurred prior to the inception date of the policy A loss that occurred during the policy period but was not discovered until five years after the expiration date
A loss discovered up to one year after the policy expired but that occurred during the policy period is correct. Explanation: The discovery clause in the loss sustained form states that losses that occur during the policy period, but are not discovered for up to one year after the policy has expired, can be covered under the expired policy. The discovery clause in the discovery form provides coverage during the policy period or within 60 days after the policy expires for coverage to apply.
Medical payments coverage under a homeowners policy are available for expenses resulting from an injury to: Answer Choices: Select the Correct Answer A residence employee while he is working. The named insured. Any regular resident in the household of the insured. A tenant of the insured.
A residence employee while he is working. is correct. Explanation: This could be someone who mows the lawn. However, a residence employee covered by workers compensation would not be covered by medical payments under the homeowner policy. Coverage does not apply to the insured or members of the insured household, roomers, boarders or tenants.
The insured has a commercial umbrella liability policy with $1 million limit of insurance. Claims were filed against the insured's umbrella policy three times during one policy period for three different occurrences. The claims are: for $75,000 on February 5; for $800,000 on May 4; and for $500,000 on July 10. Which of these claims will be paid? Answer Choices: Select the Correct Answer The February 5 claim only The February 5 and May 4 claims only All three claims None of the claims
All three claims. Explanation: Assuming these claims came from three different occurrences, all three would be paid. Keep in mind that the umbrella policy has two limits. One is the occurrence limit and the other is the aggregate limit that limits the total claim payment amounts during the policy year. The aggregate limit does not apply under most umbrella policies to automobile claims.
Which of the following is correct regarding the discovery clause in a commercial crime policy? I. Losses that occur during the policy period but that are not discovered for up to one year after expiration are covered under the loss sustained form. II. Losses that occur during the policy period or within 60 days of expiration are covered under the discovery form. Answer Choices: Select the Correct Answer Both I and II I only II only Neither I nor II
Both I and II is correct. Explanation: Both provisions protect the insured if losses are not immediately discovered. Neither extends coverage for losses that occur beyond the policy period. These forms both cover losses only for discovery purposes. The actual loss must occur during the policy period and maybe not discovered until after the policy expiration
What is generally excluded on the Condominium commercial unit-owners form? Answer Choices: Select the Correct Answer The improvements and betterments of the unit owner Hostile Fire damage Building coverage Inside appliances and fixtures
Building coverage is correct. Explanation: Coverage for the building is generally excluded for the unit-owners form as that should be covered on the Condominium association form.
Bob and Pete's Used Cars has purchased a garage policy with dealers physical damage on the cars owned by the dealership at its location. Pete goes to an auto auction 150 miles away, purchases vehicles and drives them back to the dealership. Which endorsement, if any, is necessary to cover this exposure? Answer Choices: Select the Correct Answer Drive Other Car Coverage Hired auto specified as Covered Autos You Own Non Owned Auto Coverage Dealers Drive Away Collision
Dealers Drive Away Collision is correct. Explanation: The "dealers drive away collision" endorsement eliminates the 50 miles coverage limitation on dealers physical damage provided that the points of origin, destination, and value must be stated on the last inventory report submitted to the insurer and the value on the report needs to be significant enough to cover the value of the cars being transported over the 50 mile coverage radius.
The insured resides in a one family dwelling and is insured under an HO-5 form. She has decided to open a day care center for children. What coverage, if any, should she purchase to cover this liability exposure? Answer Choices: Select the Correct Answer Increased Liability Coverage Personal Injury Coverage Business Pursuits Coverage Home Day Care Coverage
Home Day Care Coverage is correct. Explanation: The insured should purchase the "home day care coverage endorsement" to extend her liability coverage to cover this additional liability exposure.
Which of the following would be considered fraud and grounds for voiding an automobile policy? I. The named insured intentionally answers "no" when asked on the application if he has had any speeding tickets in the past year. II. The named insured intentionally reports that all covered vehicles have a clear title when they are owned by others. III. The named insured submits a claim for fire damage that has been back-dated to a period before the policy's expiration date. IV. The named insured submits a claim for a total loss for a covered auto that he sold to an illegal auto chop shop. Answer Choices: Select the Correct Answer I, II, III and IV I and III only II and IV only I, II, and IV only
I, II, III and IV. Explanation: All four actions are fraudulent. Each is an example of deliberate misrepresentation or concealment of a material fact for purposes of improper gain. Insurers typically retain the right to void ANY insurance policy if an insured commits fraud relating to a policy.
All of the following are excluded from garage policy liability coverage, except: Answer Choices: Select the Correct Answer The use of covered autos in an organized race. Injury or damage arising out of a motorboat the named insured keeps stored in the back of his repair garage. The use of covered autos leased to others (except as a replacement for a customer's car being worked on). Damage to property being transported by the insured.
Injury or damage arising out of a motorboat the named insured keeps stored in the back of his repair garage.. Explanation: Boats are covered on the insured's premises and not off the premises for liability coverage only. The other items are excluded.
Under a Personal Auto Policy newly acquired additional vehicles are covered automatically for a limited period of time. This automatic coverage: Answer Choices: Select the Correct Answer Is as broad as the broadest coverage for any vehicle shown in the declarations. Only includes liability coverage. Only includes liability and uninsured motorists coverage. Is limited to the narrowest coverage for any vehicle shown in the policy.
Is as broad as the broadest coverage for any vehicle shown in the declarations. is correct. Explanation: Liability coverage is continuous until the end of the policy period. To continue physical damage coverage certain restrictions and limitations apply as to the number of days the insured has in the reporting of the vehicle to the insurer. In North Carolina it is 30 days. For most other states it is 14 days.
Under the commercial auto policy with respect to physical damage to a covered vehicle, which of the following is true regarding diminution of value? It is covered. It is specifically excluded..
It is specifically excluded.. Explanation: A decrease in the value because of an accident is not a covered loss in most states. The policy excludes this decrease in value when a covered vehicle has been damaged and causes a decrease in value even though it has been repaired.
In every state some classes of employment are exempt from workers compensation laws. Benefits for exempt employees: Answer Choices: Select the Correct Answer May be voluntarily provided by the employer. Are prohibited by law. Are automatically provided by state funds. May be obtained by employees who purchase individual policies.
May be voluntarily provided by the employer. . Explanation: Some states allow for the omission of coverage for certain types of employees as well as certain types of employment. For example, part-time, domestic and farm employees. The employer can voluntarily cover these employees.
Sue Green has a commercial crime policy on her restaurant, but she only chose the insuring agreement "Inside the Premises - Robbery or Safe Burglary of Other Property". If an employee steals some equipment by breaking into the premises during the daytime on a holiday, the policy would: Answer Choices: Select the Correct Answer Not cover the loss, since acts by employees are excluded. Cover the loss. Not cover the loss, since daytime burglaries are excluded. Not cover the loss, since only loss of merchandise is covered.
Not cover the loss, since acts by employees are excluded. is correct. Explanation: Sue would need to add the insuring agreement "Employee Theft" to her crime policy to cover the dishonest acts of her employees. Even though this fits the definition of burglary due to a forced entry, theft by an employee is not covered on the form. Sue would need employee theft coverage.
A steam boiler insured under an Equipment Breakdown policy explodes and causes severe damage to the building and the contents. If a fire ensues as a result of the explosion, what coverage will the policy pay? Answer Choices: Select the Correct Answer Only the damage caused by the explosion The entire loss Business Income loss from the fire Damage to property of the insured and property of others caused by the fire
Only the damage caused by the explosion. Explanation: The Equipment Breakdown policy would only pay for the damages caused by the explosion. A commercial property policy would pay for the resultant fire damage.
The insured has her fur coat specifically covered under a Personal Articles policy. It has been stored in a plastic garment bag in her closet during the good weather months. She decides to take the coat out and hang it outside to freshen up. The next door neighbor's dog sees the coat and attacks it and ruins the garment. The insurer will: Answer Choices: Select the Correct Answer Decline the claim because damage by domestic animals is excluded Decline the claim because damage by any animal is excluded Pay the claim because the loss is not excluded Deny the claim because of neglect on the part of the
Pay the claim because the loss is not excluded . Explanation: The form is an "open peril form" and would cover this type of loss whether caused by a domestic pet or a wild animal.
In a Physicians Professional liability policy two separate errors cause several claims. How is the deductible determined? Answer Choices: Select the Correct Answer Per claimant Per error Per Claim Per the total claim amount
Per Claim is correct. Explanation: The deductible on a Physicians Professional liability policy is on a per claim basis. It is not based on the error or the individual claimant or the total amount of a claim.
An insured purchases two homeowner policies from two different insurance companies. If a covered loss occurs, on what basis will the loss be settled by each of the insurers? Answer Choices: Select the Correct Answer First policy effective basis Excess basis Equal share basis Pro rata basis
Pro rata basis. Explanation: Each company will pay it's pro rata share of the loss. This means the percentage of coverage (the total amount of insurance carried) that each company provides on the risk.
Run, Jump and Hop Fitness Center is being sued for injuries sustained by several customers during a recent birthday party. Run, Jump and Hop has filed for protection under Federal Bankruptcy Laws. The insured notifies the CGL carrier of the claim and their recent bankruptcy filing. The insurer: Answer Choices: Select the Correct Answer Sends a denial letter to all claimants involved in the suit. Sends a reservation of rights letter to the insured. Processes the claim as the bankruptcy filing has no bearing on the loss. Notifies the state where the policy is written of its intent to deny the loss.
Processes the claim as the bankruptcy filing has no bearing on the loss. is correct. Explanation: Bankruptcy of the insured does not relieve the insurer of its duty to defend and handle the claim.
Homeowner policies provide liability coverage for which of the following? Answer Choices: Select the Correct Answer Property Damage and Bodily Injury Bodily injury only Property damage only Bodily Injury and Personal Injury
Property Damage and Bodily Injury is correct. Explanation: The personal liability coverage under the policy is a "single limit" in which both bodily injury and property damage coverage are provided
All of the following are reasons for cancellation of a commercial insurance policy, EXCEPT: Answer Choices: Select the Correct Answer Several large claims. Nonpayment of premium. Conviction of the named insured of a crime arising out of an act increasing the hazard insured against. Substantial change in the risk assumed by the insurer since the policy was issued.
Several large claims.. Explanation: Several large claims is not a reason for canceling a policy.
The "when more than one coverage applies" condition in crime insurance is designed to: Answer Choices: Select the Correct Answer Specifies how a claim would be allocated among the different insurers. Allow the insured to choose the company that will pay the claim. Provide for subrogation of a claim. Avoid overpayment of a claim.
Specifies how a claim would be allocated among the different insurers. . Explanation: The purpose of the clause is to specify how a claim would be allocated among the different insurers.
What symbol or symbols are used to cover hired and non-owned vehicles under the commercial auto policy? Answer Choices: Select the Correct Answer Symbols 4 and 5 Symbols 3 and 4 Symbols 8 and 9 Symbol 19
Symbols 8 and 9. Explanation: Symbols #8 and #9 is used in these instances. Symbol #8 represents hired autos only and symbol #9 represents non-owned autos only.
Which of the following statements is not true regarding a released bill of lading? Answer Choices: Select the Correct Answer The carrier agrees to over-insure the cargo so that the shipper will be compensated for all losses. The common carrier may limit its liability by using this type of contract. The document serves as a receipt from the carrier to the shipper of the goods. All of the responses are true.
The carrier agrees to over-insure the cargo so that the shipper will be compensated for all losses.. Explanation: The definition of a released bill of lading is "A bill of lading on which no stated value has been indicated, thereby limiting the carrier's liability to statutory amounts or to the specified rate per pound of merchandise shipped."
An inured carries a general liability policy and has hired a trucking company to transport the equipment. The trucking company carries a commercial auto policy. The insured loads a piece of machinery onto the truck and fails to secure it properly. The trucking risk is transporting the cargo and it falls off the truck and hits another car. Which policy or policies would cover this claim? Answer Choices: Select the Correct Answer The commercial auto policy would cover the claim. The insured's general liability would cover the claim. Both would cover the claim since the owner of the equipment was negligent in the securing of the cargo and the trucker should also share in the claim since they were transporting the cargo. Neither would pay the claim.
The commercial auto policy would cover the claim.. Explanation: The commercial auto policy would respond to cover the claim for damages to the damaged party. The damage to the cargo itself would not be covered. The trucking risk and the insured should both carry cargo coverage.
The insured is covered under a BOP special form. Thieves break into the insured's warehouse and steal building materials. The insurer will: Answer Choices: Select the Correct Answer The insurer will deny the claim The insurer will only pay part of the claim The insurer will pay the entire claim, subject to policy limits, less any deductible The insurer will only pay on the basis of ACV
The insurer will pay the entire claim, subject to policy limits, less any deductible. Explanation: The special BOP form provides for burglary coverage and the claim will be paid in total less any applicable deductible. Loss of money is not covered and crime coverages must be added by endorsement or separate policies issued.
The Equipment Breakdown policy (formerly called boiler and machinery) provides for replacement cost coverage in case of a covered claim. Under what conditions would the insurer only pay actual cash value in case of a loss? Answer Choices: Select the Correct Answer Only if the policy is endorsed to provide ACV coverage The policy pays replacement only if the repairs are made within twenty four months of the accident. The policy will pay replacement cost as long as the repairs are expedited regardless of a time limit. The policy always provides replacement cost coverage in case of a covered claim.
The policy pays replacement only if the repairs are made within twenty four months of the accident. . Explanation: The valuation clause provides for replacement cost coverage on all property, except if repair or replacement is not made within 24 months of the date of the accident, actual cash value will be paid.
What type of contract is binding on only one party? Answer Choices: Select the Correct Answer Unilateral Bilateral Adhesion Indemnity
Unilateral is correct. Explanation: Unilateral means "one-sided." An insurance policy is one sided because only the insurance company is legally bound to perform its part of the agreement.
A 36 foot ocean sailing vessel with auxiliary power would best be covered under what type of policy? Answer Choices: Select the Correct Answer Yacht Policy Watercraft Policy Recreational Ocean Marine Policy Homeowner's Policy
Yacht Policy is correct. Explanation: Since the watercraft is used for ocean travel, the yacht policy would be the best choice
The insured has a communication failure at his premises due to a lightning strike at the phone company. The insured's phone system is damaged and he is out of business for four days. Which endorsement is necessary to provide coverage for the loss of business income?
Your answer: Utility Services - Direct Damage is incorrect. The correct answer is: Utility Services - Time Element. Explanation: The Utility Services - Time Element endorsement would cover the loss of business income in this example if the phone system was listed on the endorsement and the cause of the loss was covered by the policy.
The XYZ Company has insurance coverage with the following companies. In case of a $10,000 loss, how much will Company C pay? 1.Insurance Company A - $50,000 2.Insurance Company B - $40,000 3.Insurance Company C - $10,000 Answer Choices: Select the Correct Answer $10,000 $1,000 $40,000 $30,000
$1,000 is correct. Explanation: The total amount of coverage in force is $100,000. Company C has 10% of the total amount of insurance and must therefore pay 10% of the loss which is $1,000.
Under the farm forms, the maximum amount payable for a loss to a satellite dish is: Answer Choices: Select the Correct Answer $250. $1,000. $500. $750.
$1,000.. Explanation: The pre-2000 policy forms provided $250 for a satellite dish. Under the newer forms, the limit has been increased to $1,000.
What is the limit of insurance that applies to property in transit in the BOP? Answer Choices: Select the Correct Answer $1,000 $2,500 $5,000 $10,000
$10,000 . Explanation: The BOP provides a $10,000 limit for property in transit.
Sam's home located in a rural area is insured under a DP-2 dwelling form with a $500 deductible. He experiences a fire at his home and has to call the local volunteer fire department to extinguish the fire. He receives a bill from the fire department in the amount of $800. How much of the bill from the fire department will his policy pay? Answer Choices: Select the Correct Answer Nothing $300 $500 $800
$500. Explanation: The policy will provide $500 to pay for fire department charges incurred when the fire department is called to save or protect covered property from a peril insured against. This coverage is additional insurance and no deductible applies.
Which of the following are excluded from the loan/lease endorsement: Answer Choices: Select the Correct Answer Excessive use charges Cost of warranties Negative equity All of the responses apply
All of the responses apply is correct. Explanation: The loan/lease gap endorsement will not pay for any of these items as well as past due payments and late fees.
Owners and contractors protective liability protects against which of the following? Answer Choices: Select the Correct Answer Contingent Liability Fire Excess Liability Theft
Contingent
Which of the following would be considered a consequential loss under a dwelling policy? Answer Choices: Select the Correct Answer Water damage to a house as a result of a fire. A tree falling on a roof and a branch breaks a window. Food spoilage in a freezer as a result of a fire in the house. Smoke damage to a detached garage as a result of a fire.
Food spoilage in a freezer as a result of a fire in the house. is correct. Explanation: Food spoilage resulting from a covered peril cutting off the electricity would be an example of a consequential loss.
The HO-3 provides coverage against how many perils on covered structures? Answer Choices: Select the Correct Answer 17 perils 18 perils 24 perils None of the responses are correct
None of the responses are correct . Explanation: The HO-3 does not list the perils for structures. The form provides open peril coverage. The contents coverage does list the covered perils.
Whose responsibility is it to see that a ship is seaworthy? Answer Choices: Select the Correct Answer The Ship Owner The Shipper The Captain Both the Captain and the Crew
The Ship Owner. Explanation: The ship owner is ultimately responsible to see that the ship is sea worthy. This is an implied warranty in ocean marine insurance
A curtain catches fire above the stove in the kitchen. This is what type of fire? Answer Choices: Select the Correct Answer Friendly Controlled Sustained Unfriendly
Unfriendly. Explanation: This is considered to be an unfriendly fire. It has left its place of containment
