Casualty Practice Exam Questions
With the personal auto policy (PAP), the limit of liability for a loss to a borrowed or rented trailer is: $1,000 $1,500 $2,000 $2,500
$1,500 Under the PAP, the most an insurer will pay for a loss to a non-owned trailer is $1,500.
What is the minimum amount of liability coverage required in an automobile insurance policy issued in Minnesota for damage to the property of others in any one accident? $10,000 $15,000 $20,000 $25,000
$10,000
What is the maximum amount an employer will pay for reasonable funeral expenses if an employee dies as a result of a work-related injury? $5,000 $7,500 $10,000 $15,000
$15,000
If the bus drivers employed by a business are assigned a workers compensation classification code with a rate of $2.50 and the employer has payroll of $100,000 for that classification code, what is the unmodified premium for that classification? $25,000 $2,500 $250 $25
$2,500 A preliminary unmodified premium is determined by multiplying the appropriate rates for the applicable job classification by the premium basis. The unmodified premium for the bus driver classification would be $2.50 multiplied by $100,000 divided by $100, or $2,500.
The medical payments limit of liability shown in the declarations of Candy's personal auto policy is $2,000. Candy is injured twice in two separate accidents involving her covered auto. The medical payments expenses for the first accident are $1,500 and $3,800 for the second accident. What is the maximum that her policy will pay for expenses resulting from the two accidents? $2,000 $3,500 $4,000 $5,300
$3,500 The medical payments limit shown in the declarations is the maximum that the insurer will pay for each person injured in a single accident. In this case, her insurer will pay $1,500 for the first accident and $2,000 (the maximum allowed for an accident) for the second accident.
What is the minimum amount of liability coverage required in an automobile insurance policy issued in Minnesota for bodily injury to one person in any one accident? $15,000 $20,000 $30,000 $40,000
$30,000
What is the minimum amount of liability coverage required in an automobile insurance policy issued in Minnesota for bodily injury to more than one person in any one accident? $30,000 $40,000 $50,000 $60,000
$60,000
Jocelyn is a resident insurance producer who has completed 16 hours of continuing education through courses offered by a local insurance company in the last two years. How many of these 16 credit hours may she apply to her continuing education requirements for this licensing period? A) None B) 8 C) 12 D) 16
12 Every resident licensed insurance producer must complete at least 24 credit hours of approved courses during each licensing period (including 3 hours on ethics). No more than half of the credit hours per licensing period may be obtained through courses sponsored by, offered by, or affiliated with an insurance company or its agents.
What is the maximum number of weeks during a period of temporary total disability for which a disabled employee may receive workers' compensation benefits? 52 weeks 104 weeks 130 weeks 180 weeks
130 weeks Compensation for temporary total disability is payable for a period of up to 130 weeks. Once an employee has been paid 52 weeks of temporary total compensation, the employer or insurer must notify the employee in writing of the 130-week limitation.
Anthony becomes a producer for Acme Insurance Company. Acme has not filed the notice of appointment with the Commissioner. It must do so within A) 10 days B) 15 days C) 30 days D) 31 days
15 days The insurer must file a notice of appointment with the Commissioner within 15 days of making the producer its agent or receiving the first insurance application from the producer.
How long is the waiting period before workers' compensation wage-loss benefits are paid to the injured employee? 3 days 5 days 7 days 10 days
3 days
How long must insurers keep files of advertisements used to sell insurance policies in Minnesota? 3 years 4 years 5 years 7 years
3 years Every insurer must keep in its home office a file that contains every advertisement used to market its insurance policies for at least three years from the date they were last used in Minnesota.
A leased auto may be listed in the declarations in a personal auto policy (PAP) if it is leased to the named insured under a written contract for at least: 3 months 6 months 9 months 12 months
6 months
Failure to give the insured written notice of any time limitation in the insured's automobile insurance policy is an unfair claims settlement practice. When must the insured receive this notification? 15 days before the limitation takes effect 30 days before the limitation takes effect 45 days before the limitation takes effect 60 days before the limitation takes effect
60 days before the limitation takes effect An insurer commits an unfair claims settlement practice by failing to give written notice to the insured of any time limitation contained in the insured's automobile insurance policy at least 60 days before the limitation takes effect.
Carlos has a Lessees of Safe Deposit Boxes endorsement on his commercial crime policy to cover insured property kept in a bank safe deposit box. He does NOT need to show which of the following to prove a burglary within the definition of this endorsement? The safe deposit box was locked. The safe deposit box was kept in a locked vault. A guard was on duty at all times. There are signs of forcible entry on the exterior of the vault and the box.
A guard was on duty at all times. "Burglary" is defined in this endorsement as the taking of property from within a locked safe deposit box in a locked vault through unlawful entry, as evidenced by marks of forcible entry on the exterior of both the vault and the box.
How do a hazard and a peril differ? The terms "hazard" and "peril" are synonymous. A peril is a condition that increases the frequency of a loss while a hazard is anything that increases the severity of a loss. A hazard is a condition that increases the frequency and severity of loss while a peril is a cause of loss. A hazard is a cause of loss while a peril is a condition that increases the frequency of loss.
A hazard is a condition that increases the frequency and severity of loss while a peril is a cause of loss
A person is entitled to basic or optional economic loss benefits, including any benefits due a survivor, when A person is injured while using a converted motor vehicle. A person dies while attempting suicide. A person is severely injured while driving in an official racing contest. A person trying to avert bodily harm accidentally injures another person.
A person trying to avert bodily harm accidentally injures another person. A person is not entitled to basic or optional economic loss benefits if an injury was intentionally caused. However, a person does not intentionally cause injury if the purpose of his or her act causing the injury was to avert bodily harm to himself or herself or another person.
Which of the following would be considered an indirect loss? A) A home is damaged by fire and smoke. B) Additional living expenses are incurred while a person whose house was damaged lives in a hotel while the home is repaired. C) Torrential rains cause flooding in a basement. D) A motorist loses control and crashes into a garage.
Additional living expenses are incurred while a person whose house was damaged lives in a hotel while the home is repaired.
Which of the following statements about insurance advertisements in Minnesota is NOT correct? A) Advertisements must disclose that policyholders are protected by the Minnesota Insurance Guaranty Association. B) Advertisements must disclose the extent to which losses are not covered due to preexisting conditions. C) Advertisements include prepared sales talks and materials used by producers when soliciting insurance. D) Advertisements must be truthful and not be misleading
Advertisements must disclose that policyholders are protected by the Minnesota Insurance Guaranty Association. It is an unfair trade practice for anyone to use the existence of the Minnesota Insurance Guaranty Association, or the protections the association offers, for the purpose of selling insurance.
Brandon receives his Minnesota insurance producer's license in the mail. Eager to safeguard it, he looks for a suitable place in which to keep it. Which of these places is appropriate? A) Over the fireplace mantle in his home B) Among his trophies in the basement recreation room of his home C) Beside his diploma on the wall of his office D) the glove compartment of his car
Beside his diploma on the wall of his office
Rebecca tells a potential customer that an insurer he is considering disputes all claims from its policyholders, though she knows this is not true. What do her actions constitute? A) False advertising B) Defamation C) Unfair discrimination D) Twisting
Defamation
When meeting with a prospect to discuss a proposed insurance policy, Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Tyler committed? A) Defamation B) Rebating C) Unfair discrimination D) Coercion
Defamation
Which of the following is NOT a prohibited unfair or deceptive practice? A) Discrimination among risks B) Rebating premiums C) Twisting D) Intimidation
Discrimination among risks Insurers determine which risks to accept and which to refuse based on sound actuarial principles. While they discriminate among these risks, they cannot unfairly discriminate when determining the risks to insure, the terms or conditions of the insurance they provide, the benefits they pay, or the continuation of a policy.
The Minnesota Insurance Commissioner can examine the business transactions, accounts, and records of insurers and producers as often as necessary, but must do so at least once in how many years? One year Four years Five years Ten years
Five years
Which of the following is NOT a power granted to the Minnesota Commissioner of Insurance? Licensing producers and companies Enforcing insurance laws Issuing regulations to administer insurance laws Imprisoning individuals for violating insurance laws
Imprisoning individuals for violating insurance laws The Commissioner examines insurers and individuals to determine whether they have engaged in unfair methods of competition or deceptive acts or practices but does not imprison individuals for violating insurance laws.
Zelda, a producer selling property and casualty insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the Minnesota Insurance Guaranty Association. Which of the following statements is correct regarding this kind of assurance? A) It is recommended when selling property and casualty insurance. B) It is prohibited at all times. C) It is beneficial when selling to first-time prospective purchasers. D) It is highly regulated by the Insurance Department.
It is prohibited at all times. It is an unfair trade practice to use the existence of the Minnesota Insurance Guaranty Association, or the protections the association offers, for the purpose of selling insurance.
John carries "other than collision" and "uninsured motorist" coverage on his personal auto policy (PAP) but not collision coverage. If a deer were to dart into the road and run into the side of his car, which of the following correctly describes how his policy would respond to the resulting damage? It would not cover the loss because John does not have collision coverage. It would cover the loss because other than collision coverage includes contact with an animal. It would not cover the loss because the car did not collide with the deer, but rather the deer collided with the car. It would cover the loss because collision with an animal is covered under the PAP's uninsured motorist coverage.
It would cover the loss because other than collision coverage includes contact with an animal. Other than collision coverage covers damage to a covered auto from perils other than collision. Contact with a bird or animal is one of those listed perils.
Janet, a local tax collector, used tax receipts to buy a lake home. She is prosecuted for embezzling these funds and converting them her personal use. Though she is covered by a public official bond, what must happen before the bond will pay for the loss? Janet must be found guilty in a criminal trial. Janet must admit to the theft of tax receipts. Janet must repay as much of the loss as she is financially able. Janet must be discharged from her official duties.
Janet must repay as much of the loss as she is financially able. Unlike an insurance policy, a bond is not the first recourse for recovery of a loss. A public official bond-a type of fidelity bond-guarantees that a public official will pay any losses up to the face amount of the bond. The bond will pay instead of the official if the official is financially unable to pay the loss.
Corinne, a producer in St. Cloud, is under investigation for allegedly using clients' premiums to pay for her expensive lifestyle. The Commissioner has charged her with violating Minnesota's insurance code and regulations. Corrine is entitled to all of the following EXCEPT: A)Notice of a hearing at least 20 days in advance B)A hearing at which she can present evidence in her favor C) Legal counsel provided by the Insurance Department, if she cannot afford an attorney D) A formal statement of the charges made against her
Legal counsel provided by the Insurance Department, if she cannot afford an attorney
States obtained the principal right to regulate the business of insurance through the: Jones Act Federal Trade Commission Act McCarran Ferguson Act Gramm-Leach-Bliley Act
McCarran Ferguson Act The McCarran-Ferguson Act of 1945 gave states jurisdiction over insurance regulation, with limited applicability of certain federal laws. Nevertheless, the federal government has gradually increased its regulation of insurance since the Act.
An agent sold a homeowners policy to Mrs. Tannenbaum, who suffers from Alzheimer's disease. When Mrs. Tannenbaum's son learned of the insurance sale, he claimed the policy was not a legal contract, requested cancellation of the policy, and obtained a full refund for which of the following reasons? A) The insurance agent didn't have a life insurance license. B) Mrs. Tannenbaum was not a competent party. C) The insurance company was an admitted insurer. D) Mrs. Tannenbaum was over 65 years old.
Mrs. Tannenbaum was not a competent party.
The home office of Ferguson Industries is located in Nebraska. Other offices are located in Kansas and Virginia. Ferguson's workers compensation policy lists Nebraska as the state where coverage applies. The workers compensation statutes of which states are covered by the policy? Kansas, Nebraska, and Virginia Virginia Kansas Nebraska
Nebraska The policy only provides coverage to claims brought under the workers compensation statutes of states designated on the Information Page.
All of the following statements regarding the identity theft or identity fraud expense coverage endorsement under a businessowners policy (BOP) are true EXCEPT: No deductible applies to this coverage. A limit of $25,000 applies to expenses included in the endorsement. It pays loan application fees when the original application is rejected on the basis of incorrect credit information. An additional limit of $5,000 applies to advertising expenses incurred to restore the insured's reputation.
No deductible applies to this coverage. Identity fraud expense coverage is subject to a single $250 deductible.
Nate, a small business owner, bought a delivery van last year from Discount Auto Sales. Since then, he has spent a lot of money to repair the van. When he gets the latest repair bill from Discount, he loses his temper and drives the van through the plate glass window of the dealer's showroom. Will Nate's business auto policy cover Discount's claim for property damage? Yes, the business auto policy provides coverage for property damage liability. No, the expected or intended exclusion will rule out coverage. Yes, but on an excess basis because the dealer's property coverage is primary. No, the contractual liability exclusion will rule out coverage.
No, the expected or intended exclusion will rule out coverage. The business auto policy, like liability policies in general, excludes coverage for bodily injury or property damage expected or intended by the insured.
Bill and Ben are employees of Norton's Appliances. Bill usually drives the company van on deliveries and Ben helps Bill unload and deliver the appliance. While they are taking a refrigerator to a customer, they collide with a large truck. Ben is injured and files a claim against Bill and Norton's Appliances. Is Ben's claim covered under Norton's business auto policy? Yes, there is no exclusion that would eliminate coverage. No, the handling of property exclusion would apply. No, the mobile equipment exclusion would apply. No, the fellow employee exclusion would apply.
No, the fellow employee exclusion would apply. The BAP's fellow employee exclusion precludes coverage for an employee's bodily injury that arises out of and in the course of a fellow employee's employment. Workers compensation insurance will provide a remedy for Ben in this case.
How does medical payments coverage under the personal auto policy differ from medical payments coverage under a homeowners policy? Homeowners policies cover medical payments for third parties and members of the insured's family. PAPs cover medical payments for third parties. PAPs cover medical payment for third parties and resident members of the insured's family. Homeowners policies cover medical payments for third parties. Both policies cover medical payments on the same basis. Neither policy covers medical payments for family members.
PAPs cover medical payment for third parties and resident members of the insured's family. Homeowners policies cover medical payments for third parties. PAP medical payments coverage provides limited first-party protection for the named insured and resident family members as well as third parties who are injured in an auto accident. In this respect, it differs from the homeowners medical payments to others coverage, which does not cover the named insured's injury.
Which of the following persons would NOT qualify for a temporary producer's license in Minnesota? Colleague of a disabled producer Surviving spouse of a deceased producer Part-time producer of a licensed agency Person designated by a producer on active military duty
Part-time producer of a licensed agency Anyone who transacts insurance in Minnesota, even on a part-time basis, must obtain an insurance producer's license.
The Minnesota Insurance Commissioner finds that Nadir Insurance Company forces its insureds to accept its offers to settle their claims by threatening to litigate if they refuse. What must the Commissioner first do to stop Nadir from continuing this unlawful practice? A) Issue an injunction against Nadir B) Petition the attorney general to seek a court injunction against Nadir C) Order the arrest of the Nadir employees who are responsible for this practice D) Order Nadir to pay a fine
Petition the attorney general to seek a court injunction against Nadir The Commissioner would petition the attorney general to ask the District Court of Ramsey County to issue an order of injunction. The Commissioner cannot issue an injunction, arrest, or penalize any party without asking the court for an order to do so.
Dave is seriously injured when his car is struck in the rear by Phil, an uninsured motorist. Depending on the jurisdiction, uninsured motorists coverage may apply to accidents involving any of the following situations EXCEPT: Phil does not have liability insurance on the auto involved in the accident. Phil's insurer is insolvent. Phil is a hit-and-run driver who cannot be identified. Phil meets the state's financial responsibility laws and will pay Dave's claim himself.
Phil meets the state's financial responsibility laws and will pay Dave's claim himself. Depending on the jurisdiction, uninsured motorists coverage may apply to accidents involving an uninsured motorist, an insolvent insurer, and a hit-and-run driver. In some states, if a driver forgoes auto insurance but meets financial responsibility laws, he or she may pay the claim from personal funds. UM coverage would not apply.
Nadir Insurance instructs its producers to omit certain information from their records of insurance transactions for the previous year. This information would give the Department of Insurance reason to expand any routine examination of Nadir if the Department knew about it. Nadir's instructions are Permitted Prohibited Advisable Not addressed by Department regulations
Prohibited No one may make false entries in a book, report, or statement to deceive anyone who is examining an insurer's financial condition or affairs, or omit information that is relevant to the examination of the insurer's financial condition or affairs.
Your insured, Candy Land, is insured by a BOP. When it installs an automatic sprinkler system in its building, what endorsement do you add to the policy? Identity Fraud Expense Coverage Protective Safeguards Hired Auto Utility Services - Direct Damage
Protective Safeguards The BOP's Protective Safeguards endorsement requires, as a condition of coverage, that protective systems such as automatic sprinklers be maintained as required by the endorsement.
To boost her insurance sales at the end of the year, Trudy offers potential clients a $250 cash gift card in exchange for purchasing an insurance policy. Which unethical sales practice has Trudy committed? Twisting False information Rebating Churning
Rebating
Sam purchased a fire insurance policy on an old building with the intention of setting fire to the building and collecting the insurance. For what reason did the insurance company decline to pay Sam's claim, citing the policy was not a legal contract? The insurance company didn't promise to pay any claims. Sam didn't pay the entire policy premium before the fire. The insurance company isn't a legally competent party. Sam entered into the contract for an illegal purpose.
Sam entered into the contract for an illegal purpose.
Sasha, Kendall, Adam, and Julio are licensed producers in Minnesota. The Commissioner would NOT be able to suspend or revoke which producer's license for engaging in the following acts? Sasha, who sold insurance policies to family members and friends this year Kendall, who submitted an application for a producer's license containing false information Adam, who had his producer license suspended in Montana Julio, who intentionally placed insurance with an unlicensed insurer
Sasha, who sold insurance policies to family members and friends this year The Commissioner can revoke or suspend the licenses of producers who engage in all of the listed acts but cannot suspend or revoke a producer's license for selling insurance to family and friends.
Stephanie is a licensed insurance producer in Iowa and Minnesota. She receives a public reprimand on Oct. 1 from the Iowa Commissioner for improperly accounting for premium payments. She is also charged with money laundering and pleads no contest to the charge in federal district court on Nov. 1. Which of the following statements is correct with respect to the information she must provide the Minnesota Insurance Commissioner? A) She must report the reprimand by Oct 10 and the nolo contendere plea by Nov. 30. B) She must report the reprimand by Oct. 30 and the nolo contendere plea by Nov. 10. C) She does not need to report the reprimand but must report the nolo contendere plea by Nov. 10. D) She does not need to report the reprimand or the nolo contendere plea.
She must report the reprimand by Oct. 30 and the nolo contendere plea by Nov. 10.
An increase in premium for a policy (including removal of an accident-free or claim-free discount) that is based upon an accident or a traffic violation is a Rebate Surcharge Overcharge Tariff
Surcharge A surcharge is any increase in premium for a policy, including the removal of an accident-free or claim-free discount, based upon an accident or a traffic violation.
Olympic Insurance Company in St. Paul appoints Marcus as its producer. All of the following statements about the appointment are correct EXCEPT: A) Olympic can unilaterally terminate the appointment. B)Marcus can unilaterally terminate the appointment C) If Marcus loses his license, the appointment is terminated. D) The Commissioner can terminate the appointment.
The Commissioner can terminate the appointment. An appointment remains in effect until either the insurer or the producer terminates it, or until the producer's license has been terminated for any reason. The Commissioner cannot terminate an appointment. An insurer terminates an appointment by notifying the Commissioner and the producer. If the insurer does not specify the date of termination, the termination takes effect on the date that the Commissioner receives the notice. Within 30 days of notifying the Commissioner, the insurer must give the producer a current statement of the producer's commission account.
A home may not be eligible for coverage under a FAIR plan in most states because of all of the following EXCEPT: Fire damage has not been repaired. The property is open to trespass. The air-conditioning and heating system is obsolete. Flammable material is stored on the property.
The air-conditioning and heating system is obsolete. Most FAIR plans stipulate that property in poor physical condition, including property with unrepaired fire damage, is ineligible for coverage, as is vacant property, property open to trespass, and property with poor housekeeping, including overcrowding and storage of rubbish and flammable material.
A home may not be eligible for coverage under a FAIR plan in most states because of all of the following EXCEPT: Fire damage has not been repaired. The property is open to trespass. The air-conditioning and heating system is obsolete. Flammable material is stored on the property.
The air-conditioning and heating system is obsolete. Most FAIR plans stipulate that property in poor physical condition, including property with unrepaired fire damage, is ineligible for coverage, as is vacant property, property open to trespass, and property with poor housekeeping, including overcrowding and storage of rubbish and flammable material.
In which of the following situations would uninsured motorist coverage NOT protect the owner of an insured vehicle following an accident? The other driver has liability insurance on his auto, but with limits that are less than the amounts required by state law. The other driver was denied auto insurance coverage. The other driver's insurance company is insolvent. The other driver left the scene of a hit-and-run accident but was later identified.
The other driver left the scene of a hit-and-run accident but was later identified. Uninsured motorists coverage does not apply when the owner or operator of a hit-and-run vehicle can be identified.
Vanessa borrowed her friend's pickup and crashed it into a brick wall, totaling it. When she submits a claim under her personal auto policy for the destroyed pickup, her insurer says it won't make payment until a condition is met. What is that condition? The pickup truck owner's policy must pay first. Vanessa must first pay the deductible. Vanessa must cancel her insurance policy. Vanessa must subrogate the claim.
The pickup truck owner's policy must pay first. Physical damage coverage for non-owned vehicles on a PAP is on an excess basis, meaning the vehicle owner's insurance must pay first.
Which of the following correctly describes the coverage (if any) that is provided through a commercial property policy for an employee's personal computer that is brought to the company for business-related work? The policy covers the personal property of others, such as employees, while the property is in the employer's care, custody, or control. the policy does not cover the personal property of others under any circumstances. While the policy covers the personal property of non-employees while the property is in the employer's care, custody, or control, it excludes employees' property. The policy only covers the personal property of customers or visitors, and only while it is in their possession.
The policy covers the personal property of others, such as employees, while the property is in the employer's care, custody, or control. The personal property of others coverage in a commercial policy refers to property in the insured's care, custody, or control while located on or in the premises or in the open or a vehicle within 100 feet of the described premises. Personal property of others includes property of employees
BBC Insurers filed its new rates with the Commissioner on June 1. On June 10, the Commissioner requested more data to justify the rates. BBC neglected to submit the requested data. What is the outcome of BBC's failure to respond? The rate is presumed to be inadequate. The rate is presumed to be discriminatory. The rate is presumed to be excessive. The rate is effective until BBC submits the data and the Commissioner accepts or rejects it.
The rate is presumed to be excessive. Rates are not effective unless they have been filed with the Commissioner. If the Commissioner requests supporting data and it is not filed within 30 days after the request, the rate is no longer effective and is presumed to be excessive.
How many sections does the ISO businessowners policy (BOP) contain? two three four five
Three The ISO businessowners policy contains three sections: Section I - Property, Section II - Liability, and Section III - Common Policy Conditions (which apply to both property and liability coverage sections).
What is the purpose of an assigned risk plan? To provide benefits to employees for work-related injuries in particularly hazardous occupations To assist an employer in obtaining approval to self-insure To provide workers' compensation coverage to employers rejected by a licensed insurance company To provide workers with legal counsel if they are unable to obtain workers' compensation benefits to which they are entitled
To provide workers' compensation coverage to employers rejected by a licensed insurance company
Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of Minnesota. What are Acme and Apogee engaging in? A) Acceptable marketing and underwriting practices B) Unfair and prohibited business practices C) Insurance fraud D) False advertising
Unfair and prohibited business practices Acme and Apogee are agreeing to an unreasonable restraint of trade in the insurance business of Minnesota. Furthermore, they are engaging in unfair discrimination by charging persons of the same class and substantially equal risk different premium rates, and by paying different benefits to persons in this class.
An employee is not entitled to receive benefits under workers' compensation laws if the injury giving rise to the claim for compensation Was intentionally self-inflicted Was due to an accident that could have been prevented if the employer had made the employee aware of the hazard Arose out of an accident in the course of employment Resulted from an occupational disease
Was intentionally self-inflicted
If the building Hannah's business owns is destroyed because floodwaters sweep it away during a hurricane, how will her business property policy respond? Water damage will be excluded from coverage. Wind damage will be excluded from coverage. Both flood and wind damage will be covered. Both flood and wind damage will be excluded from coverage.
Water damage will be excluded from coverage. Damage caused by flood is excluded under a property insurance policy's water damage exclusion. Wind is not an excluded peril.
Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed? No, because only one commission can be paid on a policy sale. No, because he is no longer licensed. Yes, because his license was not revoked or suspended. Yes, because he was licensed when the policy was sold.
Yes, because he was licensed when the policy was sold. Commission earned on the renewal of a policy can be paid to a person for selling, soliciting, or negotiating the policy if the person was licensed to transact insurance at the time of the sale, solicitation, or negotiation of the policy.
Mutual Insurance Co. initially approves auto insurance for Ralph, who admitted on the application to a speeding ticket two years ago. Three months later, Mutual discovers that Ralph got seven speeding tickets in the past two years. Mutual cancels Ralph's insurance. Can it legitimately do so? Yes, the insurer may cancel at any time if the policy was obtained through material misrepresentation. No, because it did not discover the speeding tickets within 60 days. No. If Mutual insured Ralph with one speeding ticket, it cannot cancel the policy for additional speeding tickets. Yes, any more than one speeding ticket is automatic grounds for cancellation.
Yes, the insurer may cancel at any time if the policy was obtained through material misrepresentation. The insurer may cancel auto insurance at any time if the policy was obtained through material misrepresentation. A material fact is relevant information that would induce the insurer either to decline the insurance altogether, or not accept it unless a higher premium is paid.
The very fact of owning wolves in captivity makes the owner responsible for injuries that may occur to others from the wolves even if the owner has not been negligent, due to the doctrine of: absolute (strict) liability vicarious liability negligent liability civil liability
absolute (strict) liability Under absolute (or strict) liability, the law holds people responsible for injuries or damage even when they have not been negligent due to the inherently dangerous nature of their activity. Strict liability is used to impose liability for injuries caused by blasting operations, keeping wild animals in captivity, and other activities that are by their nature considered dangerous.
All of the following sources of information are commonly used in the underwriting review process EXCEPT: loss history data motor vehicle record (MVR) academic records credit information
academic records
Robin has a valuable porcelain collection she wants to insure. Because it's difficult to assess the collection's value, Robin and her insurer have worked out a schedule listing the value of each insured item. What valuation method have they used? agreed value actual cash value market value replacement cost
agreed value Policies that use the agreed value approach typically cover works of art and one-of-a-kind items for which it is difficult to determine a value. To handle this issue, the insurer and the insured agree on the value of each insured item when the policy is written, and that value is listed in the policy's schedule. The insurer then agrees to pay the dollar amount in the schedule if the item is stolen or destroyed.
What kind of contract involves the exchange of possibly unequal amounts? contract of adhesion aleatory contract bilateral contract personal contract
aleatory contract An aleatory contract involves the exchange of unequal amounts because one party may receive a benefit that is out of proportion to the consideration he gives. An insurance policy is an aleatory contract.
Jane's insurance policy contains a stated amount valuation provision. This provision states that she will receive the lowest of three amounts if her covered property is stolen or destroyed. Which of the following is NOT one of those three amounts? the property's actual cash value at the time of the loss an amount agreed upon by the insurer and Jane the cost to repair or replace the property with similar property the dollar amount of insurance specified in the policy schedule
an amount agreed upon by the insurer and Jane With the stated amount approach, the insurer agrees to pay the lowest of three amounts if the covered property is damaged or stolen: the property's actual cash value at the time of the loss, the cost to repair or replace the property with similar property, or the dollar amount of insurance specified in the policy schedule.
Regarding workers compensation, a surviving spouse is entitled to death benefits in the form of weekly benefits that typically end at age 62 at the earlier of age 65 or remarriage when the youngest child reaches age 26 when the spouse starts collecting Social Security retirement benefits
at the earlier of age 65 or remarriage Though details vary by state, a surviving spouse's benefits under a workers compensation policy usually end the earlier of age 65 or remarriage. Some states limit total payments to a maximum dollar amount.
Judy owns a small beauty salon located on the first floor of her apartment building. A customer trips over a hair dryer cord in the salon and is injured. Judy is held legally liable for the customer's injury. What coverage under her businessowners policy (BOP) will pay for this customer's injury claim? supplementary payments coverage medical expenses coverage commercial general liability coverage business liability coverage
business liability coverage Business liability coverage covers sums the insured becomes legally obligated to pay as damages for bodily injury, property damage (including fire or explosion damage to rented premises), and personal and advertising injury.
Which form of the commercial general liability (CGL) policy covers the insured for injuries or damages only if the policy is in force when the claim arises? special form basic form claims-made form occurrence form
claims-made form A claims-made policy covers the insured for injury or damage only if the policy is in force when the claim arises. It may also restrict coverage before a certain date.
All of the following are elements of a legal contract EXCEPT: offer acceptance consideration counteroffer
counteroffer The three elements of a legal contract are offer, acceptance, and consideration. A counteroffer may or may not be involved.
What section of a commercial property policy identifies the insured's name, address, and limits of insurance? declarations page conditions exclusions coverage form
declarations page The declarations page of a commercial property policy contains the name of the insured, the address of the covered premises, and the policy period.
The liability section of the personal auto policy (PAP) imposes two duties on the insurer: the duty to indemnify (or pay for covered claims) and the duty to defend. Which duty is said to be the broader or greater duty? duty to defend, which can apply even when coverage is unclear duty to indemnify, since an accident can result in a high severity loss both duties are equal in scope duty to indemnify, since most cases do not involve litigation
duty to defend, which can apply even when coverage is unclear The duty to defend is broader than the duty to indemnify as it even extends to cases in which it is unclear whether coverage applies.
The part of a property or liability insurance policy that modifies standard coverage is called the: declarations definitions endorsements insuring agreement
endorsements
If an employee who is injured on the job elects to receive workers compensation benefits, they effectively give up their right to sue the employer for those injuries. Which provision in the state's workers compensation laws removes this right to sue? covered employments provision exclusive remedy provision penalties for failure to insure provision independent contractors provision
exclusive remedy provision Every state's workers compensation law contains an exclusive remedy provision that states that the benefits the law provides are the employee's sole remedy against the employer for covered injuries sustained on the job. In most cases, an injured employee is entitled to the workers compensation benefits provided by law. In exchange for these benefits, the employee cannot sue the employer.
Which of the following is a peril? A) a poorly lit neighborhood B) an icy sidewalk C) fire D) unsafe driving
fire
Lucy tells you she is the only person authorized to cancel her insurance policy or make changes. Her spouse and other members of her household, who are also insured under the policy, do NOT have this authority. Lucy is the policy's: named insured first named insured insured additional insured
first named insured The first named insured is the person or organization whose name appears first in the policy declarations. In addition, the first named insured has the rights in the policy and is the only person authorized to cancel the policy or request policy changes.
Needing the money, Ted burns down his house to collect the insurance proceeds. On what grounds might the insurance company deny coverage if it can show that Ted intentionally burned the house down? A) misrepresentation B) fraud C) concealment D) impaired risk
fraud
In 2013, the Insurance Services Office (ISO) introduced the Auto Dealers form as a replacement to the: business auto policy commercial general liability policy auto liability section of the businessowners policy garage policy
garage policy
All of the following are covered by a personal umbrella policy EXCEPT: claims of personal injuries caused by a member of the insured's family injury covered under a workers compensation policy excess liability above the insured's primary personal auto policy personal injury claims, such as libel, wrongful eviction, and false arrest
injury covered under a workers compensation policy In general, personal umbrella liability insurance provides extremely broad coverage, though it does not cover injuries covered under a workers compensation policy.
Washington Insurance Company has established the cost of a liability insurance policy at $8.00 per $1,000 of coverage purchased. Which of the following terms correctly describes that $8 value? contract fee base premium exposure factor insurance rate
insurance rate An insurance rate is the price of insurance for each unit of exposure. In this example, $8 is the rate for each $1,000 unit of exposure.
Sheila lives in New Mexico in a home constructed of adobe. What basic type of construction is her home? frame masonry veneer masonry superior (non-combustible or fire-resistive)
masonry In a building of masonry construction, the exterior walls are constructed of masonry materials, including adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile, or similar materials with floors and roof of combustible construction. (This does not apply to floors resting directly on the ground.)
Though she lives in a high crime area, Hilda rarely locks the door to her apartment when she goes out, figuring that whatever she owns of value is insured and can be easily replaced if stolen. What type of hazard does this represent? moral hazard morale hazard physical hazard emotional hazard
morale hazard This is an example of a morale hazard. Morale hazards are individual tendencies that arise from a state of mind, attitude, or indifference to loss. Not locking one's car or driving recklessly are also examples of morale hazards.
Which form of the commercial general liability (CGL) policy covers the insured for injuries or damages that occur during the policy period even if that policy is no longer in force when the claim arises? special form broad form claims-made form occurrence form
occurrence form The CGL occurrence form provides insurance for bodily injury or property damage that occurs during the policy period, regardless of when losses are reported.
All of the following are causes of loss forms available on the commercial property policy EXCEPT: open causes of loss form basic causes of loss form broad causes of loss form special causes of loss form
open causes of loss form The three causes of loss forms available on a commercial property policy are Basic, Broad, and Special.
Mrs. Updike returned from shopping one day to find that her car had rolled from the parking lot, down a ditch, and into the river. What coverage on her personal auto policy, if any, would cover this loss? No coverage on the PAP will pay for this loss. other than collision collision uninsured motorists
other than collision Other than collision coverage is open perils physical damage coverage that pays for losses caused by all perils other than collision, unless one of the exclusions applies.
Spring and summer months generate the highest sales for Greenfield Outdoor Furniture Company, so the company holds most of its inventory during those months. What would provide Greenfield with the most appropriate coverage during that time of year? peak season limit of liability endorsement value reporting form ordinance or law coverage any commercial property policy
peak season limit of liability endorsement The peak season endorsement can be used to avoid overinsurance during the insured's slack season (or underinsurance during the peak season) by establishing a higher limit for only the period of time specified in the endorsement.
A cause of loss is called a(n): hazard exposure peril risk
peril
Jim sold his car to Bill and would like to also transfer his auto policy to Bill. His agent tells Jim that is not possible without the insurer's consent (which is unlikely to be given) because property and casualty insurance policies are: contracts of adhesion aleatory contracts conditional contracts personal contracts
personal contracts Property and casualty policies are personal contracts between the insurer and a particular policyholder. They are the only parties who can fulfill the contract's terms. Because the agreement between these parties is personal, a property and casualty insurance policy cannot be transferred to a third party without the insurer's consent, which is unlikely.
A container of gasoline stored in the basement next to the furnace is an example of a: peril morale hazard physical hazard cause of loss
physical hazard Physical hazards are individual physical characteristics that increase the chance of loss. They exist due to the presence of some physical condition. Storing gasoline or other flammable liquids near a furnace presents a physical hazard because it increases the likelihood of a loss due to fire.
All of the following topics are covered in the common policy conditions form of a commercial property policy EXCEPT: cancellation policy period changes inspections and surveys
policy period The policy period appears on the Declarations page of a commercial property policy.
The Health Insurance Portability and Accountability Act (HIPAA) affects property and casualty insurers because medical information may be used in each of the following situations EXCEPT: settle a claim for stolen property pay auto medical payments claims settle bodily injury claims settle workers compensation claims
settle a claim for stolen property
Exclusions in an insuring agreement can apply to all of the following EXCEPT: perils types of property covered types of losses strict liability
strict liability Exclusions limit the broad coverage granted in property and liability insuring agreements. Exclusions can apply to specified perils (such as earthquake or flood), certain types of property (such as trees or money), or specified types of losses (such as equipment testing losses or intentional losses). They cannot reduce strict liability.
Muller's Floral Shop uses vans to deliver flowers and is insured with a business auto policy. It wants auto liability coverage on all autos, but medical payments, UM/ UIM, and physical damage coverage only on owned autos. Which symbols does Muller's insurance agent recommend for these coverages? symbol 2 for all vehicles and coverages symbol 7 for liability on owned vehicles; symbol 4 for medical payments, UM/UIM, and physical damage coverage symbol 1 for liability coverage on any auto; symbol 2 for medical payments, UM/UIM, and physical damage coverage on owned autos symbol 7 for liability, medical payments, UM/UIM, and physical damage coverages on all owned autos
symbol 1 for liability coverage on any auto; symbol 2 for medical payments, UM/UIM, and physical damage coverage on owned autos When symbol 1 is selected, any auto, whether owned, non-owned, hired, or otherwise, is a "covered" auto for that coverage. Symbol 2 often is used to designate medical payments, UM, UIM, and physical damage coverage on all owned autos.
Matt is planning a vacation in Greece. He wonders if his casualty insurance policy will cover a loss in Greece. Which provision within the policy should he check to answer this question? liberalization clause assignment provision loss payable clause territory provision
territory provision Insurance policies usually include a coverage territory provision that indicates where coverage applies. Some policies apply anywhere in the world. However, a typical coverage territory provision applies to losses occurring in the United States, its territories, and its possessions; Puerto Rico; and Canada.
A driver crashes into Kate's car parked in her driveway. When the driver backs away, he rips the bumper off Kate's car. The bumper flies through the air and knocks down Kate's fence. What is the proximate cause of the damage to the fence? the car crash the location of the fence the driver backing away from the crash the bumper flying through the air
the car crash
With respect to liability coverage under the personal auto policy (PAP), all the following are considered to be "insureds" EXCEPT: a resident family member of the named insured when using the named insured's covered auto the driver/owner of a ride share vehicle that transports the named insured any individual using the covered auto with the named insured's permission any organization that may be held liable for acts arising from the use of the named insured's covered auto
the driver/owner of a ride share vehicle that transports the named insured While there are a variety of "insureds," they all have one thing in common: use of the named insured's covered auto. The mere fact that the named insured is a passenger in someone else's vehicle does not make that other person an "insured."
Under the terms of an insurance policy's liberalization clause, an insurer may revise a standard policy form at the time of renewal for all the following reasons EXCEPT: new exposures court decisions the insurer's need to make the policy more profitable the need to clarify the insurer's intentions
the insurer's need to make the policy more profitable Through the policy's liberalization clause, an insurer may revise its standard policy form to deal with court decisions, new exposures, or a need to clarify the insurer's intentions. Some policy updates expand coverage, while others reduce it. However, revising the policy simply to make it more profitable is not an acceptable reason for doing so.
Nimiroski Motors failed to use a reasonable degree of care in protecting the vehicles parked in its lot overnight. It failed to lock the gate to the fence and turn on the outdoor lights in the lot. As a result, Oscar's car was vandalized. He most likely claimed Nimiroski Motors was guilty of: the tort of negligence a crime fraud breach of contract
the tort of negligence Negligence is the failure to use a reasonable degree of care under a given set of circumstances. A reasonable car dealership would have locked the gate to its fence and turned on its outdoor lights when closing for the night
Which of the following would be covered under the property section of an unendorsed businessowners policy (BOP)? theft of furs loss of watercraft while afloat theft of valuable papers loss of electronic data
theft of furs Theft of furs, jewelry (items worth at least $100), patterns, dies, molds, and forms is covered, though coverage is limited to $2,500.
Liability insurance involves an area of law known as: criminal law common law tort law punitive law
tort law Liability insurance is "lawsuit protection" insurance that involves an area of law known as tort law, which protects the rights of individuals from other civil wrongs. Also called casualty insurance, it protects against claims alleging that an insured person or organization is responsible for another party's injury or damage.
The property section of a businessowners policy (BOP) provides how much coverage for the cost of replacing or restoring electronic data that has been destroyed or corrupted by a covered cause of loss? up to $10,000 up to $50,000 up to $100,000 up to $500,000
up to $10,000
