AZ Practice Test Missed Questions

The insured carries an unendorsed DP-3 dwelling policy on his home and personal contents. While traveling abroad someone broke into the home and stole $200 in cash, a shotgun valued at $1,000, and other household items valued at $2,000. Damage caused by the burglars is $1,500. Assuming no deductible applies to their coverage how much would be paid?

$1,500. The DP-3 only provides damage to covered property caused by the burglars. Theft is excluded under the DP-3 unless endorsed with the theft endorsement.

An insured has $500 cash stolen from her home. How much can she collect under a standard homeowner policy?

$200. The standard homeowner policy limits coverage for cash to only $200.

What does the term "bailment" mean?

A bailment occurs when property is voluntarily delivered by the owner to another party, to be held by the other party (to repair, store, clean, etc.) and returned to the owner in the same or better condition. Bailment is the act of placing property in the care, custody and control of another, usually by agreement in which the holder (bailee) is responsible for the safekeeping of the property. Possession changes temporarily from the owner to the bailee, but ownership does not change.

The maximum seating capacity and total floor space for a fine dining restaurant covered under a BOP is?

A fine dining restaurant can have up to 150 seats but still must have only 7,500 of total floor space.

A franchised auto dealership would need:

A franchised auto dealership would need garage liability because it includes auto liability as well as commercial general liability coverage.

Named Perils form endorsement

A property insurance term referring to policies that provide coverage only for loss caused by the perils specifically listed as covered. It contracts with all risks coverage, which applies to loss from all causes not specifically listed as excluded.

Common carriers are responsible for damage to customer goods they transport except for damage resulting from

Acts of God

Which of the following would cover copyright infringement by an insured under a CGL policy?

Advertising injury liability. This provides coverage for the infringement of copyrighted ideas, slogans, trademarks, advertising, and others.

The Extended Business Income provision covers the first 60 days after the loss for reimbursement of earnings for the insured business:

After the repairs have been made to the insured property. Extended Business Income pays for any additional loss of business after the property is actually repaired and operations are resumed, with reasonable speed, until the operation generates the business income amount that would have existed had no loss occurred. This coverage is usually limited to 60 days. An endorsement can be used to extend the period of time and an additional premium is charged

In most states, which of the following most accurately describes an "admitted" insurer?

An insurer that can transact insurance in the state under a certificate of authority

Which of the following is an ideal form of protection for the frequent shipper of goods?

Annual Transit-Policy. The annual transit policy is written to cover the goods shipped by the insured on a regular basis throughout the year.

The HO-6 provides ________ peril coverage on personal property.

Broad. The HO-6 (Condominium form) provides broad peril coverage on the personal property of condominium owners.

Under the provisions of the BOP, what happens when an insured fails to advise the insurance company that the insured's sprinkler system is inoperative beyond a 48 hour period?

Coverage for fire losses will be excluded

Under the Yacht policy, what coverage applies to bodily injuries to the captain and crew?

Crew coverage under the Jones Act. Crew coverage would provide the coverage for the captain and crew this is a provision under the Jones Act

A business auto policy has a $100,000 limit of insurance for liability coverage. As a result of an automobile accident involving a covered auto, two people are injured. The first injured party sues the named insured and wins a $150,000 judgment. The insurer pays its limit of insurance. If the other injured party later sues the insured, the insurer will:

Deny further obligations to the insured as a result of the other injured party

Insurance policies contain exclusions because:

Exclusions protect the insurer against duplicate coverage and potential losses it will not or cannot accept. Both are elements of the principal of indemnification.

Which of the following would NOT be covered under the specified cause of loss physical damage coverage under the Commercial Auto form?

Glass breakage

Which of the following is correct regarding the differences in coverage between an HO-3 and an HO-5?

HO-3 covers personal property on a named peril basis, while personal property under an HO-5 is covered on an open peril basis

Which of the following would not need an inland marine policy to cover its stock?

Jewelers, furriers, and the owners of coin collections can obtain the broadest protection for their stock under inland marine insurance, which will provide coverage on an open-perils ("all-risk) and worldwide basis. Furthermore, inland marine is adaptable to the unique values and hazards associated with jewelry, furs, and coins. A grocer's stock, however, does not have unique value characteristics nor is it in transit. Adequate coverage can be arranged with commercial property insurance.

Tony is sailing his 28-foot cabin cruiser on the lake. He runs into a neighbor's dock, destroying the structure and damaging Tony's boat. A crew member in the cabin of the boat is injured and a guest riding on the boat is also injured. All of the following policies below would provide coverage in this situation, EXCEPT:

Medical Payments coverage under Tony's Homeowner policy

Which of the following policies would cover an insured's $15,000 inventory loss discovered during a semi-annual inventory?

None of these policies would cover the loss. When the only proof of a loss is an inventory or accounting computation, insurance will typically NOT pay for the loss.

Dwelling forms provide what amount of coverage for grave markers and mausoleums?

Nothing. The dwelling forms do not provide any coverage for these items. The homeowners forms provide a limit of $5,000

The penalty for failure to satisfy a coinsurance requirement of a property insurance policy is:

Only a portion of a partial loss will be paid

The principle of indemnity is best illustrated by which of the following insurance policy clauses?

Other Insurance. This clause is designed to prevent the insured from collecting from more than one insurer on the same claim. The insured is not supposed to profit from a loss.

The insured carries employee theft coverage. An employee does not steal money, securities or other property but forges some of the insured's checks. What will the insurance carrier do?

Pay the claim. This insuring agreement provides coverage in case an employee takes money, securities, or other property unlawfully from the insured, thereby depriving the insured of that item. Therefore, loss or damage to money, securities and other property that results from forgery is also covered in this insuring agreement.

Which of the following is not covered under aircraft hull insurance?

Personal Effects. Like the coverage under personal auto physical damage coverage, personal effects are not covered.

No insurer may issue checks or drafts or partial settlement of a loss or claim that is still being negotiated that:

Releases the insurer from additional liability. An insurer cannot issue a check for partial payment of a claim that contains language that releases the insurer from total liability unless the limit of the policy or the bond has been paid or a compromise has been otherwise made.

Under a Mobile Home policy, how is the mobile home itself covered in case of a total loss?

Replacement Cost Basis

The Motor Carrier Act of 1980:

Requires trucking operators to file proof of pollution liability insurance

Losses caused by all of the following are covered under the National Flood Insurance Program, EXCEPT:

Sewer backup. Most insurance carriers now offer sewer backup coverage. This type of loss is not considered to be a flood loss.

What is "express" authority under the law of agency?

The authority given to the agent by the company in a written contract or orally.

All of the following are true regarding the limit of insurance shown on the declarations page of a commercial auto policy, EXCEPT:

The commercial auto policy contains an aggregate limit for all claims paid during the policy year. Once that limit is paid for all accidents, the insured would be uninsured for future claims during the remainder of the year. Commercial auto policy does not contain an aggregate limit for all accidents during the policy period

The business auto policy liability exclusion pertaining to pollution removes coverage for each of the following, EXCEPT:

The escape of pollutants caused by damage to the property containing them when the damage results from the use of a covered auto

Which of the following auto endorsements would include family members as insureds?

The extended non-owned auto endorsement includes members of the household when driving a non-owned vehicle.

A print shop is insured under a Businessowners Policy with a separate policy covering the press. If a loss occurs that is covered under both policies, how will the Businessowners Policy respond?

The other insurance clause in the BOP is somewhat different than in other policies. The policy states that other coverage is considered primary (whether collectible or not) and that any coverage for the loss under the BOP will be considered EXCESS.

The HO-6 policy provides full replacement cost coverage if it is rendered a total loss by fire, EXCEPT:

The structure portion occupied by the insured as a residence

The homeowner policy written to cover only personal property and personal liability is an:

This is the HO-4 also referred to as a tenant's homeowner policy or renters insurance.

The insured has several locations and desires to insure his contents coverage. His agent advises him to complete a statement of values form and issues a policy with one limit to cover all locations. This is an example of:

blanket coverage, where all locations are covered under one limit

Under a dwelling policy (DP-2 or DP-3), what is the maximum that would be paid for additional living expenses if Coverage A was $60,000?

$12,000. The form provides 20% for additional living expenses and fair rental value. Therefore the policy would pay up to $12,000

The commercial auto policy can be used to cover which of the following?

A semi-trailer. The semi-trailer is the only one that fits the definition of vehicle under the commercial auto policy. Mobile equipment must be added by endorsement.

Which of the following would be covered under an aviation policy?

A temporary substitute aircraft.

Which of the following would NOT be considered mobile equipment under the business auto policy?

A tractor could be a vehicle used solely on the farm premises and therefore a piece of mobile equipment

Which of the following property is excluded under homeowner personal property coverage's?

A valuable baseball card collection owned by the named insured's son that is covered under a separate personal articles floater.

Under which of the following claims settlements are the claim invoices presented and paid with no attempt to obtain a separate release?

A walk-away release

Which of the following would be considered a "supplementary payment" coverage under a business auto policy?

All post-judgment interest in a suit defended by the insurer. Supplementary payments do not include physical damages, nor personal expenses of employees. The bail bonds would be covered except that Mexico is outside the coverage area.

Who signs the declaration page on the Equipment Breakdown policy?

An authorized representative

Which of the following is not specifically considered an unfair trade practice under the insurance code of most states?

Appointment of producers by unauthorized insurers. Although an unauthorized insurer cannot legally transact insurance in the state, there is no specific provision prohibiting the appointment of producers by such an insurer.

How is the property causes of loss changed from risks of "direct physical loss" to "named perils" coverage under the BOP?

Attach the Named Perils form endorsement.

Which of the following autos are eligible for coverage under a business auto policy?

Basically any type of licensed motor vehicle is eligible for the business auto policy.

Mr. Jamison owns a summer home in the woods that he rents to others. During his absence bears enter the home and do considerable damage. The insured reports the claim to his insurance company. The adjuster advises Mr. Jamison to report the claim as vandalism damage. The claim report is investigated by the insurance department. How should the Department of Insurance treat this action on the part of the adjuster?

Charge the adjuster with an unfair claims act. Advising the insured to misrepresent the facts of the claim would be an unfair claims practice act

All of the following are true regarding the "mobile agricultural machinery and equipment" form, EXCEPT:

Combines and cotton pickers are eligible for coverage. Combines and cotton pickers must be specifically scheduled and are not covered under the blanket coverage of this form.

All of the following are included in an insurance property estimate of damages, EXCEPT:

Depreciation. Estimated damages do not include the application of depreciation. The application of depreciations the role of the insurance adjuster after an estimate to replace the damaged property has been performed.

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?

Drive other car coverage. 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.

Employment practices liability insurance: I. Covers claims generally excluded by workers compensation, such as wrongful discharge or sexual harassment. II. Can be added as an endorsement to a directors and officers policy.

EPL covers employment claims not arising out of workers compensation, including wrongful discharge, sexual harassment and discrimination. It can be sold as an endorsement to D&O or a stand-alone policy.

Which crime coverage form would cover embezzlement?

Forgery and alteration. Forgery is defined as any false writing with intent to defraud. The act of signing someone else's name with the intent to deceive is considered forgery.

Which of the following homeowner forms does not provide full coverage on the dwelling - Coverage A?

HO-4. Both the HO-4 and HO-6 provide improvement and betterment coverage but not full coverage on the dwelling. The HO-6 (condominium form) provides very limited dwelling coverage since the main structure is not fully owned by the insured.

Businessowners policies provide "Preservation of Property" coverage when property is removed from the premises to protect it from a covered cause of loss. The coverage will apply at other locations for up to:

If an insured moves property from a covered location in order to preserve it from a loss by a covered peril, that property will be covered for ANY direct loss while it is being moved or is temporarily stored at another location for the next 30 days.

When is it appropriate for an adjuster to secure a non-waiver agreement with the insured?

If there is a question of coverage. A properly executed non-waiver agreement allows the insurance company to complete a thorough investigation without implying that coverage is available for the loss

Many stationary objects, such as bridges, tunnels and power lines fall within the nationwide marine definition because they are considered to be:

Instrumentalities of transportation and communication

In the contractual agreement under which a business auto insured rents a car, she is obligated to assume all liability to third parties in connection with the operation of the rented car. The insured's BAP liability coverage may cover:

Liability the named insured would have had with or without the rental contract

Third-party provisions allow for an entity that lends money to an insured to purchase property, to be named on the insurance for that property. In property insurance, this is known as a "standard mortgage clause." In auto insurance, it is known as:

Loss Payable Clause

Garagekeeper's coverage excludes all of the following losses, EXCEPT:

Loss to a high-value stereo system permanently installed in a covered auto. Garagekeeper's coverage is added to the garage liability policy. Its only purpose is to provide physical damage coverage to customers' vehicles left at the garage site. It basically covers collision and comprehensive type claims. The garage is acting as a bailee and by law, is required to exercise more than reasonable care. Theft by employees can only be covered by a fidelity bond.

The insured is covered under a Businessowners Policy. He owns a hardware store that suffers a loss from a covered peril. His loss of income is $50,000. How will the loss be paid under the BOP?

On an actual loss sustained basis ($50,000)

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?

Only the damage caused by the explosion. 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

Which of the following incidents of property damage would be covered by BAP liability coverage?

Only the damage to the neighbor's parked car would be covered. The other items are specifically excluded.

Surplus Lines Coverage is usually written by an unauthorized insurer when:

Only when the requested coverage cannot be obtained from authorized insurers

Which of the following is not a duty of an adjuster in a property loss?

Prepare repair cost estimates of the loss. It is the duty of the insured to obtain repair cost estimates of the damage and present them to the adjuster for payment or review. The adjuster would prepare a rough estimate for the insurer but in the final analysis for the payment of the claim, the insured would have to get the exact repair estimates.

The home business insurance endorsement is available to cover certain businesses under the homeowner program. Which of the following coverages cannot be included?

Professional Liability Coverage

Which of the following is excluded on the commercial property special causes of loss form?

Smoke from industrial operations. Smoke, vapor, or gas from industrial operations is excluded on the special causes of loss form. Personal property is a subject of the building and personal property coverage form. Fire damage is fully covered when a building is unoccupied. When a building is vacant for 60 or more days, fire damage is covered but settlement will be reduced by 15%

What damages are designed to pay for losses that can be quantified, such as medical expenses and loss of income?

Special Compensatory

Which commercial property form provides the broadest coverage?

Special Form, there is no Deluxe coverage in Commercial Property

Difference between strict and absolute liability?

Strict liability is a standard for liability and means a party is liable for all damages as a result of his or her dangerous actions or products. Absolute liability involves claims for which there is no defense involving extremely hazardous activities such a blasting.

That branch of the law which defines rights and duties is referred to as:

Substantive Law

The insured carries an HO-3 homeowner policy. He has complied with the 80% to value provision for replacement cost dwelling coverage. He suffers a fire loss. Which of the following property is NOT covered on a replacement cost basis?

The carpeting is not covered on a replacement cost basis. This coverage can be obtained by attaching the personal property replacement cost endorsement

Tommy's Tip Top TV Store is delivering a new flat screen TV to Jerry's house. The delivery people set the TV down on the floor in the hallway to get a better grip. While picking it up, the TV makes deep scratches in the wood floor. How will the business auto policy for Tommy's Tip Top TV Store respond to Jerry's demand for damage to his floor?

The damage to the floor is covered under the liability coverage of the business auto form

Under a dwelling policy what is the maximum that would be paid for one month for additional living expenses if Coverage A was $75,000?

The form provides 20% of Coverage A for additional living expense under the DP-2 and DP-3. Therefore, $75,000 X 20% = $15,000. This amount divided by 12 months = $1,250/month.

An insured's wife is wearing a diamond ring while on vacation in Europe. The ring valued at $1,500 is stolen. What coverage would apply under their Homeowner Policy?

The policy will pay the loss less the deductible. Personal property is covered anywhere in the world. The theft limit for jewelry is $1,500. The loss less the deductible is covered.

Free on Board Destination

The term means that the buyer takes delivery of goods being shipped to it by a supplier once the goods arrive at the buyer's receiving dock

An insurance company can audit the named insured's books and records:

Up to three years after the termination of a policy

Misrepresentation vs Concealment

the difference between misrepresentation and concealment. misrepresentation: the oral or written statement is false vs concealment: the oral or written statement is silent, silent when there is an obligation to speak.

The Last Clear Chance Doctrine

the law of torts that is employed in contributory negligence jurisdictions. A negligent plaintiff can nonetheless recover if he is able to show that the defendant had the last opportunity to avoid the accident

Which of the following coverage's are not automatically included in the BOP?

Employee dishonesty. Employee Dishonesty coverage is not automatically included in the BOP, it must be added by endorsement for an additional premium.

surplus line coverage

Excess and surplus lines insurance is a segment of the insurance market that allows consumers to buy property and casualty insurance through the state regulated insurance market, where policyholders, agents, brokers and insurance companies all have the ability to design specific insurance coverages and negotiate pricing based on the risks to be secured.

A business covered under a BOP is shut down due to the acts of a civil authority. Which of the following BOP coverages would NOT be subject to a waiting period before coverage would apply?

Extra expense.

An insured purchased business auto physical damage coverage against specified causes of loss. Protection applies to all of the following perils, except:

Falling objects. This is named peril coverage (specified causes of loss) and is not nearly as broad as comprehensive coverage. This coverage form names that perils that will be covered and falling objects is not a named peril. Comprehensive covers anything other than collision.

A non-waiver agreement would allow the insurance company to do which of the following?

Insurers can use a non-waiver agreement when there is a question about coverage or limits. In such a signed agreement, the claimant/policyholder stipulates and acknowledges that the insurer's continued investigation into and the adjustment of the loss is not to be construed as an admission of coverage by the insurer.

A large tree has fallen into Paul's yard caused by wind. The claims service representative advises Paul to call a contractor to remove the tree and send the bill to the insurance company. The bill is $1,200. However, the policy coverage for the debris removal of a tree that has fallen by wind is only $500 unless the tree hits the house, which was not the case. What should the adjuster do?

Pay the $1,200. The consumer relied on the statements of the claims representative so the insurance company would be estopped from denying the claim. The insurer had already waived its right to deny full payment of the claim because of the statements of the claims representative. Therefore, the $1,200 should be paid.

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?

Pro rata basis. 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

Which characteristic of an insurance contract supports the ambiguity ruling in favor of the insured on a policy?

Reasonable expectations. Since an insured can reasonably assumed certain things to be covered on a policy, the ruling will always be in favor of the insured if the language is vague or ambiguous.

In cases of comparative negligence, the proportional share of each party in the entire liability will be based on:

Relative degree of fault. With comparative negligence, liability will be based on the relative degree of fault or responsibility. The laws allows an injured party to collect from another party for a loss, even when the injured party contributed to his or own loss.

An insured has purchased a Businessowners Policy. He insures both the real and personal property. Assuming no endorsements apply, will property losses be adjusted on an actual cash value basis or on a replacement cost basis?

Replacement Cost Basis. Unless endorsed to the contrary the BOP adjusts property losses on a replacement cost basis.

If an insured desires broader coverage than provided under the homeowners program for camera equipment this coverage can be obtained through:

Schedules Personal Property Endorsement. In order to provide specific coverage for specified personal property the scheduled personal property endorsement should be used. This provides "all risk" coverage that is broader than the coverage under the HO forms and has less exclusions

All of the following types of signs can be covered by the Sign Coverage Form, except:

Signs carved in stone or brick

After completing an inspection of an insured's pressure equipment and fire suppression systems, the inspector determines that the pressure equipment needs to be repaired and the suppression systems have not been cleaned and inspected in the time frame required by the policy. The insurer will:

Suspend coverage immediately by red tagging the items until they are repaired, cleaned and pass reinspection

The BOP provides liability coverages. Which of the following is a correct statement regarding the limits of coverage?

The BOP contains two Aggregate limits, one for Premises and Operations Liability and one for Products and Completed Operations. The coverage also has a Per Occurrence limit

The liability exposure of the We-Cure-Em Drug Company is:

There is no way to determine a company's potential liability as a result of their operations. Certain operations are more hazardous than others and therefore these risks normally carry higher limits of liability coverage.

Why do insurers file declaratory judgment actions with the courts?

To determine if a claim falls within the insuring agreement of a policy. A declaratory judgment action is a lawsuit seeking a judicial determination of whether policy coverage applies to a claim. Insurers usually file declaratory actions to determine whether a claim falls within the provisions of the insuring agreement of a policy.

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?

Utility Services - Time Element. 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 loss was covered by the policy

Res Ipsa Loquitur

the principle that the occurrence of an accident implies negligence or "it speaks for itself"

Ordinance or Law exclusion

which means that the policy covers the building as it exists, but it does not cover the cost to upgrade the building to current building codes and ordinances after a loss.