PROPERTY & LIABILITY INSURANCE (Test 3): Chapter 24-33
a
"Malpractice insurance" is a term usually associated with all the following except: a) physicians. b) architects. c) attorneys. d) accountants. e) all of the above
d
A drunken driver killed a man and severely injured his wife. The court awarded the wife $10 million in damages. A substantial part of the damages were undoubtedly a) loss of consortium damages. b) special damages. c) general damages. d) punitive damages.
d
A major exposure facing businesses that is not covered by the CGL and for which separate liability coverage may be required is a) contractual liability. b) product liability. c) liability for the acts of independent contractors. d) employment practices liability.
True
A majority of the states have enacted compulsory automobile insurance laws. True/False
b
Aircraft liability coverage is similar to automobile liability except for the inclusion of a) medical payments coverage. b) admitted liability coverage. c) world wide coverage. d) the absence of an employee exclusion.
d
All but which of the following might be interposed as a defense by a negligent party in a tort action? a) assumption of risk. b) contributory negligence. c) comparative negligence. d) res ipsa loquitur.
False
All liability assumed under contract is excluded under Homeowners Section II. True False
c
All of the following statements are true with respect to liability insurance except a) it is commonly referred to as third party coverage. b) the insurer is obligated to pay damages only when the insured is legally liable. c) the injured party has a direct claim against the insurance company. d) the insurer promises to defend any suits involving the type of liability insured. e) none of the above.
True
Although the Homeowners policy does not provide coverage for suits alleging libel, slander, or defamation, coverage against such losses is available by endorsement. True/False
d
Although the definition of "insured location" is quite broad, it does not include a) a dorm room in which a member of the insured's family is staying while at school. b) a hotel or motel room in which a family member is staying. c) an additional residence acquired by the insured during the policy period. d) a residence owned by the insured at inception and not revealed to the insurer. e) none of the above is included in the definition of "insured location."
d
An individual might purchase a monoline fire dwelling policy rather than a Homeowners form on a dwelling because a) he or she does not need the liability coverage of the Homeowners. b) the monoline dwelling form will be substantially cheaper. c) the Homeowners form is not available in the state in question. d) the dwelling is not owner occupied.
d
An individual who had a chance and failed to avoid an accident would likely be liable under the doctrine of a) respondeat superior. b) res ipsa loquitur. c) negligence per se. d) last clear chance.
a
An intervening cause is one which: a) disrupts the chain of causal events. b) increases the severity of a loss. c) leads to a negligent act. d) prevents the loss from occurring.
d
Automobile Insurance Plans are sometimes referred to as "no-fault plans." a) reduce the cost of automobile insurance to other drivers. b) provide government subsidized insurance to some drivers. c) will provide auto insurance to anyone who can pay the premium. d) are designed to provide auto insurance to persons who cannot obtain it thorough normal channels.
a
Automobile collision insurance covers damage to: a) the insured's auto regardless of liability. b) the insured's auto and another auto with which it collides. c) another auto the insured runs into if the insured is not liable. d) another auto the insured runs into if the insured is liable. e) more than one of the above.
True
Automobile insurance rates are higher for youthful male operators who own their own autos or are principal operators than for youthful male operators who are incidental operators. True/False
c
Coverage C of the homeowners policy is extended to all of the following except: a) property borrowed for use by the insured. b) machinery used in maintenance of the premises. c) pets owned by the insured. d) clothing of a daughter living at college.
d
Coverage against loss resulting from fraudulent use of an insured's credit cards or electronic fund transfer card a) is specifically excluded from coverage. b) applies under the theft peril, but only if the card was actually stolen. c) is subject to the $200 limit applicable to money and securities. d) is provided under an Additional Coverage with a $500 limit.
c
Coverage for liability arising out of a business owned by the insured is covered under a) the homeowners policy without modification. b) the Business Pursuits endorsement to the homeowners policy. c) the HOBIZ endorsement to the homeowners policy. d) the mandatory Home Day Care endorsement to the homeowners policy. e) more than one of the above.
a
Coverage under the theft peril of the Homeowners forms HO-2, HO-3, and HO-4 a) is identical in all forms. b) excludes theft of money. c) excludes theft of jewelry, furs, silverware, and guns. d) all of the above.
c
Criticisms of the tort system as it relates to the automobile include all but which of the following? a) some people are not compensated under the tort system. b) in many instances the compensation is inequitable. c) the cost of operating insurance companies is too high. d) the system is needlessly slow, delaying compensation. e) the system is needlessly expensive.
b
Despite its title, the Inside the Premises Theft of Money and Securities insuring agreement covers money and securities a) against the perils of theft and employee dishonesty. b) not only for theft, but for disappearance and destruction by virtually any cause. c) both on and off premises. d) against loss by forgery and computer fraud.
c
Fire legal liability coverage under the Homeowners policy: a) is optional and an additional premium charge is made. b) has the same limit as coverage on the insured's property in Section I. c) is important for persons who are tenants in an apartment or dwelling. d) is of little value to a renter because of the policy exclusion of damage to property rented to, or in the care, custody, or control of the insured. e) none of the above.
b
For which of the following vehicles would the liability coverage under Section II of the Homeowners policy provide coverage? a) an owned go-cart while being used away from the premises. b) a non-owned snowmobile while used away from the insured's premises. c) an owned moped while used away from the premises. d) an owned snowmobile while used away from the insured premises. e) more than one of the above.
c
In most states, Uninsured Motorists coverage provides coverage a) for both bodily injury and property damage caused by an uninsured motorist. b) only for property damage caused by an uninsured motorist. c) only for bodily injury caused by an uninsured motorist. d) is automatically included as a part of Medical Payments coverage.
False
In most states, the Homeowners policy includes coverage for workers' compensation benefits payable or required to be paid to domestic employees. True/False
d
In which of the following situations would the Personal Auto Policy not provide coverage under the liability section? a) the named insured borrows a motorhome for a vacation. b) a resident relative borrows a truck for pleasure use. c) a nonresident borrows the covered auto for business use. d) the named insured borrows a truck for business use.
b
Jones has a Homeowners Broad Form (HO-2). The bathtub overflows and causes $800 in damage to the kitchen ceiling. a) the loss is not covered under this form but would have been covered under the Homeowners Special Form (HO-3). b) the loss is covered under this form, but would not have been covered under the Homeowners Modified Form (HO-8). c) the loss is covered under this form and would also have been covered under the Homeowners Basic Form (HO-8). d) loss of this nature are inevitable and are therefore excluded.
d
Jones has a Homeowners policy. Her dog bites the mailman while he is still about three blocks away from the premises. a) there is no coverage under the policy. b) medical payments coverage applies, but not the liability coverage. c) the policy will pay only if Jones is found legally liable. d) the policy will pay medical costs under the medical payments coverage and will also pay under liability coverage if Jones is held legally liable. e) none of the above.
d
Jones is insured under a Homeowners Broad Form (HO-2). A sudden surge of power from the city's power plant burns out the motor on his freezer and the meat in the freezer spoils before the loss is discovered. a) damage to the motor is covered, but not the loss of the meat. b) loss of the meat is covered, but not the damage to the motor. c) neither the meat nor the motor is covered. d) both the meat and the motor are covered.
c
Liability insurance is concerned primarily with the financial consequences of a) crimes. b) intentional torts. c) unintentional torts. d) unintentional torts which are also crimes.
True
Liability to domestic employees of the insured is covered under Homeowners Section II except in those jurisdictions in which such employees are covered under the workers' compensation law. True False
False
Medical Payments coverage of the Homeowners Policy is an optional coverage that requires payment of an additional premium True/False
True
Most of the automobile reparation reform laws that have been enacted by the individual states are of the "modified no-fault" variety. True/False
b
One of the situations in which a common carrier may be relieved of legal liability for damage to the property of others in its care, custody, and control, is loss a) which results from the negligence of the carrier's employees. b) which results from negligence of the shipper. c) which results from unexplained losses. d) which results from fire where there is no negligence.
False
Personal Injury coverage is automatically included under the Supplementary Payments of Section II of the Homeowners policy True False
d
Personal Injury liability coverage a) is essentially the same thing as bodily injury coverage. b) is automatically included in the Homeowners policy. c) is available to business firms but not to individuals. d) includes certain intentional torts such as libel, slander, and defamation and is available by endorsement to the Homeowners. e) none of the above.
c
Property of a student living at a sorority house while attending school. a) should be insured under a Homeowners HO-4. b) is fully covered by her parent's Homeowners policy. c) may not be covered for loss by theft if left at the house for a four-month summer vacation. d) is not covered by the parent's Homeowners policy
d
So-called "distress risk companies" a) are insurers whose financial solvency is under question by the state Commissioner of Insurance. b) are also sometimes called "joint underwriting associations." c) reinsure insurers that accept poorer than average drivers as insureds. d) provide automobile insurance to high risk-drivers, usually at high premiums and under limited forms. e) operate the assigned risk plans of the various states.
False
The "Family Purpose Doctrine" as used in some jurisdictions is intended to reduce or eliminate the possibility of parental vicarious liability. True/False
a
The "earth movement" exclusion of the Homeowners policies a) excludes earthquake and volcanic eruption. b) applies only to the dwelling, but not to moveable property. c) does not appear in Homeowners form HO-3. d) all of the above.
c
The Businessowners policy is a package approach to insurance for smaller business firms, and is similar to the Portfolio Commercial Package Policy except that under the Businessowners policy a) liability coverage is not included and must be purchased separately. b) coverage on buildings and contents is available on a named peril basis only. c) many of the options available under the Portfolio Commercial Package are automatically included in the Businessowners policy. d) the Businessowners policy is designed for larger insureds with more complex insurance needs.
a
The Commercial General Liability policy contains an exclusion of a) liability arising out of automobiles. b) liability arising out of all types of mobile equipment. c) liability arising out of the acts of independent contractors. d) all of the above.
a
The Damage to Property of Others coverage under Section II of the Homeowners policies provides limited coverage for a) intentional damage by some insureds. b) damage to the insured's own property. c) damage arising out of motor vehicles. d) damage to property that is owned by members of the insured's household. e) all of the above.
c
The Employee Theft coverage of the ISO commercial crime program a) requires that individual employees be specifically named. b) covers money and securities only for loss by employee theft. c) provides blanket coverage on all employees. d) excludes loss caused by the named insured or a partner.
d
The Homeowners Comprehensive Form (HO-5) excludes loss to personal property caused by all but which of the following? a) wear and tear. b) gradual deterioration. c) earthquake. d) all of the above.
c
The Other States Insurance insuring agreement of the Workers Compensation and Employers Liability policy is designed to cover workers compensation benefits a) in states with monopolistic state funds. b) for workers for whom workers compensation coverage is not mandatory. c) when a worker employed in one state makes claim for benefits in the other state. d) of his or her home state when the injury occurs in another state.
c
The Personal Auto Policy provides coverage under the liability section for a) pleasure use of nonowned motorcycles by the named insured. b) the owner of a nonowned auto being used by the named insured. c) nonresidents operating the owned auto with permission. d) any automobile being operated by the named insured.
a
The Personal Property Floater a) provides open-peril coverage on scheduled and unscheduled personal property anywhere in the world. b) usually excludes damage by earthquake and flood. c) is generally written without a deductible. d) provides essentially the same coverage on personal property as that of the Homeowners Special Form (HO-3).
True
The applicant for insurance under an Automobile Insurance Plan cannot usually be assigned to an insurer for more than three years. True/False
True
The cost of defending suits against the insured is payable in addition to the limit of liability specified for Section II of the Homeowners Policy. True False
False
The definition of "Persons Insured" under Homeowners Section II includes the named insured's employer if the employer is held vicariously liable for acts of the insured. True/False
a
The definition of "dwelling" in the Homeowners forms includes a) additions in contact with the dwelling. b) window air-conditioning units. c) carpets and drapes. d) all of the above.
d
The definition of "flood" in the Federal Flood Insurance policy a) limits the peril to the overflow of bodies of water. b) specifically excludes mudslides. c) includes water from sources on the insured's own property. d) includes overflow of inland or tidal waters and rapid accumulation of surface water from other sources.
d
The definition of insured personal property under Homeowners Coverage C excludes a) jewelry. b) furs. c) money and securities. d) property that is specifically insured.
b
The definition of personal property in the Homeowners forms includes a) motorized vehicles as long as they are not licensed. b) borrowed property which is being used by an insured. c) property belonging to roomers and boarders. d) pets belonging to the insured.
a
The doctrine of contributory negligence a) has been replaced in many jurisdictions by the doctrine of comparative negligence. b) is a defense that benefits the injured party. c) is currently applied only in the field of employers liability. d) applies only in the case of automobile accidents.
False
The insurance industry has generally opposed enactment of guest statutes. True/False
False
The liability coverage under Section II of the Homeowners policy specifically excludes all liability arising out of watercraft. True/False
False
The liability section of the Homeowners policy includes comprehensive coverage for liability arising out of both the personal activities and all business pursuits of the insured. True/False
c
The main difference in coverage under the monoline fire dwelling policies and Section I of the Homeowners policies is a) the broader coverage on the dwelling under the Homeowners forms. b) the absence of a building law exclusion in the dwelling forms. c) the theft coverage that is included under the Homeowners forms. d) the more liberal definition of contents in the dwelling forms.
b
The major part of the premium charged for boiler and machinery insurance is used for: a) liability insurance. b) inspection services. c) direct damage insurance. d) indirect damage insurance
a
The most favorable doctrine from the perspective of a least-at-fault injured person is a) contributory negligence. b) last clear chance. c) comparative negligence. d) the principles of common law.
False
The no-fault concept applies the principle of workers' compensation to injuries arising out of the use of automobiles. True/False
b
The perils normally covered under a Bailee Customers' policy include all but which of the following? a) fire and lightning. b) wear and tear. c) the perils of transportation. d) burglary and hold-up.
d
The personal property coverage under the Homeowners policy limits coverage on a) watercraft. b) trailers and semitrailers c) personal property used for business purposes d) all of the above.
b
The principal difference among the various Homeowners forms is a) with respect to the liability coverage under Section II. b) the property covered and perils insured against in Section I. c) the definition of the dwelling in each form. d) the definition of personal property in each form.
b
The replacement cost coverage provision of the Homeowners forms applies a) only to the dwelling. b) to the dwelling and other structures only. c) to the dwelling and personal property only. d) to the dwelling, other structures, and personal property..
c
Under Section II of the Homeowners forms, liability arising out of owned golfcarts a) is totally excluded but may be added by endorsement. b) is covered only if the cart is being used for golfing purposes on a golf course. c) is broader in scope than coverage on other recreational motor vehicles. d) is covered only if the cart is being used by the named insured. e) none of the above.
c
Under a guest hazard statute a) the driver of an auto is absolutely liable to injured guests. b) public conveyances such as taxis have lower insurance costs. c) the driver's liability to guests in the vehicle is limited. d) most injured passengers have a greater chance of collecting from the driver. e) none of the above.
False
Under a guest hazard statute, the operator of a motor vehicle becomes absolutely liable to an injured guest in his or her auto. True/False
c
Under business interruption coverage, payment is made for the period a) that the business is actually interrupted. b) the period in which operations could be reasonably be resumed. c) the period from the date of loss to expiration of the policy. d) specified in the policy declarations.
e
Under most financial responsibility laws, an individual prove financial responsibility a) in order to obtain a driver's license. b) at the time of an accident in which he or she was at fault. c) in order to register an automobile. d) when he or she is held legally liable for an auto accident. d) regardless of liability when involved in an accident in which there is bodily injury or property damage in excess of some specified amount.
False
Under most financial responsibility laws, only the party at fault in an accident is required to show evidence of automobile liability insurance. True/False
c
Under most of the modified no-fault laws that have been enacted by the states to date, a) there is a total exemption from tort liability. b) suits for pain and suffering are not allowed. c) the right to sue for pain and suffering may be limited by a "threshold" provision. d) only funeral and medical expenses of the injured parties are covered. e) none of the above.
d
Under most state laws, when a driver who is required to show proof of financial responsibility is unable to do so, the penalty is a) a fine. b) imprisonment. c) a fine, imprisonment, or both. d) loss of driving privileges. e) a fine, imprisonment, or both, plus loss of driving privileges.
d
Under reforms enacted in the Flood Insurance Reform Act of 2012 a) the annual cap on premium increases in the National Flood Insurance Program was raised from 10% to 20%. b) premium subsidies are being phased out for repetitive loss properties and second homes. c) FEMA must update flood insurance rate maps. d) all of the above.
c
Under the Homeowners policy, losses arising out of the enforcement of building laws a) are totally excluded. b) are covered without limitation, up to the face of the policy. c) are subject to an exclusion but are also covered under an Additional Coverage. d) are covered for certain perils and excluded for other perils.
b
Under the Named Non-Owner Policy coverage applies for the operation of nonowned autos a) by the named insured and resident relatives. b) by the named insured only. c) by the named insured and spouse only. d) by the named insured and anyone to whom the named insured grants permission.
b
Under the Personal Auto Policy, coverage for liability arising out of the use of a nonowned auto: a) is primary with respect to coverage on the nonowned auto. b is excess with respect to coverage on the nonowned auto. c) prorates with the coverage on the nonowned auto. d) is not provided because of the care, custody, and control exclusion.
b
Under the Personal Auto Policy, if the insured has two autos insured, one with collision and one without collision, an additionally acquired auto a) is not covered for collision until it is reported to the insurer. b) is covered for collision for 14 days. c) is covered for collision for 4 days, with a $500 deductible. d) is covered for collision until the end of the policy period.
c
Under the Standard Mortgage Clause typified by the provision in the Homeowners policy, all of the following are true except: a) the mortgagee is granted the right to sue under its own name. b) the mortgagee is entitled to advance notice of cancellation. c) the mortgagee's interest in the policy is voided by dishonest acts of the insured. d) if the mortgagee is aware of an substantial increase in hazard, it must notify the insurer in order to continue coverage.
d
Under the cancellation provision of the Federal Flood Insurance Policy, the insured a) may not cancel the policy. b) has the same cancellation right as under the fire policy. c) may cancel the policy subject to 30 days notice. d) may cancel at any time, but if he or she retains title to the property, the premium for the current term is fully earned.
d
Under the doctrine of concurrent causation, the courts have ruled that when a loss results from two causes, one of which is covered and one excluded: a) coverage depends on which cause occurs first. b) the loss is usually not covered. c) part of the loss is covered and part is not covered. d) the insurer is liable for the damage.
c
Under the loss sustained form of fidelity coverage, coverage may exist for losses that occurred prior to the inception of the policy provided a) the prior insurance was written by the current insurer. b) the prior insurance was written by a different insurer. c) there was no time gap between expiration of the prior policy and inception of the current policy. d) only if the discovery period of the prior bond has not ended.
d
Under the title insurance policy, the insurer agrees a) to furnish a valid title to the insured. b) compensate any person who comes forward with a legal claim to the property. c) protect subsequent purchasers against loss resulting from a defective title transferred to them by the insured. d) defend the insured in the event of legal action in connection with losses not excluded by the policy.
True
Vicarious liability in connection with the use of automobiles may be based on either common law or statute. True/False
b
Vicarious liability involves a situation where one person becomes legally liable because of the negligence of another. One of the doctrines upon which vicarious liability may be based is a) negligence per se. b) respondeat superior. c) sovereign immunity. d) the fellow servant doctrine.
c
When a mortgagee is named in the Homeowners Policy: a) coverage applies to the mortgagee on the same basis as to the insured owner. b) all losses must be paid directly to the mortgagee. c) the mortgagee is granted certain rights distinct from those of the insured owner. d) the mortgagee takes on a legal obligation to pay any premium on which the insured owner defaults.
c
When a motorcycle is insured under the Miscellaneous Type Vehicles Endorsement, a) coverage applies to the named insured only and only for the insured vehicle. b) coverage applies to the named insured for the use of any motorcycle. c) coverage applies to the named insured, resident relatives and permissive users for the insured vehicle only. d) coverage applies to the named insured and resident relatives for the use of any motorcycle.
d
When the Homeowners policy is used to insure a mobilehome a) the scope of the perils is greatly reduced. b) contents coverage does not apply. c) Coverage A is combined with Coverage C. d) the definition of Coverage A, Buildings, is modified to include attached fuel tanks and built in furnishings.
d
When the Other Members of Your Household (HO 04 58) endorsement is used to extend the definition of "insured" to include persons not related to the insured a) property owned by the named individual is covered as insured property. b) the named individual is an insured for the policy's liability coverage. c) the effect is similar to providing a HO-4 policy for the named person. d) all of the above.
a
Which of the following is least likely to be held legally liable? a) infants. b) minors. c) charitable institutions. d) municipalities.
d
Which of the following is not a factor in determining the premium for an individual's automobile insurance? a) the age, sex, and marital status of the driver. b) the use of the automobile. c) the area in which the automobile is garaged and operated. d) past accidents in which the driver was not at fault. e) none of the above.
c
Which of the following is not one of the indirect loss coverages of the Breakdown Protection Coverage form. a) Business Interruption and Extra Expense. b) Contingent Business Interruption and Extra Expense. c) Expediting Expense. d) Spoilage Damage.
d
Which of the following is/are true regarding the National Flood Insurance Program? a) To become eligible for NFIP insurance, a community must apply with FEMA and agree to adopt certain land use and flood control measures. b) Although only about 1% of properties are repetitive loss properties, they account for between 25 and 30% of the NFIP's losses. c) Federally regulated lenders must require flood insurance on properties in Special Flood Hazard Areas when making a loan. d) All of the above.
a
Which of the following perils is covered under the Federal Flood Insurance Program: a) mudslide. b) water spray. c) rain. d) snow.
d
Which of the following perils is specifically excluded from coverage under all of the standard Homeowners forms? a) glass breakage. b) theft of money and securities. c) loss by a friendly fire. d) earth movement.
c
Which of the following use classifications has the lowest rates under the ISO auto rating program? a) Pleasure use. b) Business use. c) Farm use. d) Driving to and from work or school less than 15 miles each way. e) Driving to and from work or school more than 15 miles each way.
