OC2 Questions Missed

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

A. $69,000 The insured should have carried 80% of $200,000 or $160,000. Instead the insured carried only $140,000. [($140,000/$160,000) x $80,000] - $1,000 = $69,000.

Benny lost track of where his property ended and ran over a neighbor's sapling with his lawn mower. The neighbor, John, sued Benny for $700 stating it was an exotic tree that could not easily be replaced. John also claimed that because of the loss, he was undergoing emotional stress for which he claimed $5,000. Additionally, John asserted that the noise of Benny's mower had caused him to lose hearing in his right ear, and he was also suing Benny for $5,000 for loss of hearing. The court awarded no general damages but did award special damages related to John's lawsuit. The amount John will receive as a special damages award is A. $700. B. $5,000. C. $5,700. D. $10,000.

A. $700. Loss of hearing and emotional stress does not result in compensatory damages for actual losses. The tree, however, is an actual loss and would therefore be included in the special damages award.

The elements of negligence are A. A duty owed by the defendant to the plaintiff, a breach of the duty, proximate cause, and injury. B. A moral injustice not dealt with in criminal law and damages caused by that injustice. C. A harm not normally suffered and a harmed thing in the control of the defendant. D. A failure to use ordinary care, a malicious motive, and an injury.

A. A duty owed by the defendant to the plaintiff, a breach of the duty, proximate cause, and injury.

Day-to-day regulation of insurance falls upon A. Administrative agencies. B. Legislative bodies. C. State governments. D. Courts.

A. Administrative agencies.

Damages intended to compensate the plaintiff for certain types of injuries caused by the egregious conduct of the defendant are called A. Aggravated damages. B. Mitigated damages. C. Special damages. D. Punitive damages.

A. Aggravated damages. Damages intended to compensate the plaintiff for certain types of injuries caused by the egregious conduct of the defendant are called aggravated damages.

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

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

Injunctions differ from other common tort remedies in which one of the following ways? A. An injunction may be granted before any damage has occurred. B. A fewer number of higher courts are permitted to grant injunctions. C. Injunctions are the only one of these remedies not involving monetary damages. D. Injunctions are often granted before the other party has had a chance to respond.

A. An injunction may be granted before any damage has occurred.

Julieta went out to dinner with Hanna, her friend of several years. Hanna picked Julieta up and told her she had a bad headache and was nervous. Hanna subsequently took four tranquilizers, which Julieta knew to be an unsafe dosage, with a glass of wine. A few minutes later, Hanna drove into a grocery store badly injuring Julieta. Which one of the following is Hanna's best defense in a suit against her by Julieta? A. Assumption of risk B. Negligent entrustment C. Contributory negligence D. Guest statute

A. Assumption of risk

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

A. Ceded loss reserves are treated as an asset.

Strict liability continues to apply in A. Certain situations involving animals. B. Music composer activities. C. Professional liability. D. Certain copyright activities.

A. Certain situations involving animals. Strict liability continues to apply in products liability law, in situations involving hazardous activities. It also applies in situations involving animals with vicious propensity and wild animals.

Which one of the following is the foundation for legal systems in most of Canada's provinces and most of the Unites States? A. Common-law system B. Treatises written by prominent jurists C. Scholarly interpretations of codes and constitutions D. Civil-law system

A. Common-law system

Tommy has recurring nightmares about an auto accident in which he was injured. Two years ago he was subjected to several reconstructive surgeries leaving him with phantom pains due to the loss of one of his legs. Tommy's highly unpleasant mental reactions resulting from the driver's negligent conduct would most likely result in A. Emotional distress damages. B. Punitive damages. C. Special damages. D. Pain and suffering damages.

A. Emotional distress damages.

The most valid criticism of schedule rating is that A. It can be based on subjective criteria. B. It is based on historical, not projected, experience. C. It allows variance from standard class rates. D. It is not based on characteristics of individual risks.

A. It can be based on subjective criteria.

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

A. Legal.

Which one of the following is a requirement for the owner to put the other party in default for conversion under the unreasonable withholding of chattel? A. Owner must demand return B. Owner must have written denial of possession C. Owner must show property title to Defendant D. Owner must show property not received by fraud

A. Owner must demand return

Jeremy is a bailee who insures bailor Sam's property for Sam's benefit. Jeremy has an insurable interest in the property, but if Sam's property becomes damaged or destroyed, Jeremy A. Pays any awarded insurance proceeds to Sam. B. Splits the proceeds from any insurance settlement with Sam. C. Has no right to any insurance proceeds because it is not his property. D. Retains all payable insurance proceeds.

A. Pays any awarded insurance proceeds to Sam.

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

A. Property insurance deductibles reduce premium costs by encouraging insureds to prevent or reduce losses.

Which one of these best explains how the awarding of punitive damages in the United States for intentional injury or gross negligence had changed since they were first awarded in the 1960s? A. Punitive damages had "run wild" with the highest awards in the multi-millions. B. Punitive damages had declined sharply. C. Punitive damages peaked with the highest award at $1 million. D. Punitive damage awards have trailed behind those awards made in most other countries.

A. Punitive damages had "run wild" with the highest awards in the multi-millions.

A large task facing insurers is keeping current on new regulations or changes in regulations. Which one of the following statements is true regarding insurers staying in compliance with regulatory changes? A. Regulators publish nonemergency rules before their effective dates. B. It is unlawful for insurers to rely on service providers for the latest regulatory information. C. All regulations affecting insurance originate in insurance departments. D. Insurance departments are prohibited from posting current regulatory information online.

A. Regulators publish nonemergency rules before their effective dates.

Victoria dared her friend, Amy, to jump over a moving car on her bicycle. Amy agreed, and Victoria drove the car. It did not turn out well. The car was damaged, and Amy was injured. Amy's lawyer predicted that she would be found 50 percent at fault. Which one of the following comparative negligence rules would be most helpful to Amy's case if she decided to sue Victoria? A. The 50 percent comparative negligence rule B. The 49 percent comparative negligence rule C. The contributory negligence rule D. The slight versus gross rule

A. The 50 percent comparative negligence rule

Which one of the following best describes a decision by the officers and directors of a corporation that is made within the range of reasonable business judgment? A. The decision satisfies the duty of care and is a defense. B. The decision satisfies the duty of care but is no defense. C. The decision fails to satisfy the duty of care but is a partial defense. D. The decision fails to satisfy the duty of care and is no defense.

A. The decision satisfies the duty of care and is a defense.

All of the following are included as insureds under the Section II—Liability Coverages of a homeowners policy, EXCEPT: A. The named insured's separated spouse who resides and works in another state B. The named insured's grandmother who lives with her C. The named insured's 17-year-old foster child D. The named insured's neighbor while caring for the insured's dog if the dog causes injury while in the neighbor's care

A. The named insured's separated spouse who resides and works in another state

The waiver of premium rider that can be added to a life insurance policy A. Waives premium payments during a period of disability as defined in the policy if the disability occurs before a stipulated age. B. Reduces or waives premium payments for a whole life policy if interest rates exceed an established percentage. C. Reduces or waives premium payments for a whole life policy when the insured reaches a maximum age threshold. D. Eliminates premium payments during a period of unemployment if the duration of the unemployment is one year or more.

A. Waives premium payments during a period of disability as defined in the policy if the disability occurs before a stipulated age.

Jamal flew from his home in New York to California for a vacation. While there, he rented a car. Jamal declined all of the optional coverages that were offered to him at the rental agency. While driving the rental car, Jamal was at fault in a collision with a truck. The repairs to the rental car will cost $2,000. Jamal's Personal Auto Policy (PAP) has a $250 other than collision deductible and a $500 collision deductible. What amount will Jamal's insurer pay for the loss? A. $0 B. $1,500 C. $1,750 D. $2,000

B. $1,500

Steve and Julie purchased a HO-3 policy with a Coverage A limit of $200,000 and a Coverage C limit of $100,000. Steve and Julie added the Earthquake endorsement to their policy, which has the standard deductible. An earthquake occurs and causes significant damage to their dwelling and property. If Steve and Julie suffered a $75,000 loss as a result of the earthquake, how much coverage will their policy provide? A. $0 B. $65,000 C. $70,000 D. $74,500

B. $65,000 The policy will cover $65,000 worth of losses: $75,000 - $10,000 deductible (5% of Coverage A limit) = $65,000

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

B. A general agreement stating that the insurer is providing the coverage subject to payment of premium and to the terms of the policy.

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

B. A roll of tar paper falls off a building at night and hits someone. res ipsa loquitur doctrine: the principle that the occurrence of an accident implies negligence.

Given the following two statements about the effect of insurance on economies: I. The property-casualty insurance industry affects economies by increasing the sales of goods and services. II. The property-casualty insurance industry affects economies by providing sources of investment funds and taxes. A. Statement I is not true; statement II is true. B. Both statements I and II are true. C. Neither statement I nor II are true. D. Statement I is true; statement II is not true.

B. Both statements I and II are true.

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

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

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

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

In a negligence lawsuit, the plaintiff has the burden of proving all the elements of negligence, and the defendant has the burden of proving any A. Applicable statutes. B. Defense. C. Intervening acts. D. Liability.

B. Defense.

The Canadian Constitution A. Establishes federal responsibility for managing financial institutions. B. Empowers the federal (national) Parliament and provincial legislatures to enact legislation. C. Prohibits provincial legislatures from enacting legislation. D. Prohibits national banks from underwriting insurance.

B. Empowers the federal (national) Parliament and provincial legislatures to enact legislation.

A potential drawback of open competition rate regulation is A. Fewer insureds are likely to be insured in the voluntary standard market. B. Increased potential for insurer insolvency. C. Lower rates. D. Higher administrative costs.

B. Increased potential for insurer insolvency.

Insurer X currently writes minimal insurance business in a state, but it would like to grow significantly. Which one of the following is the least likely basis for Insurer X's rate in this state? A. Insurer X's own experience countrywide B. Insurer X's own experience in the state C. Loss costs provided by an advisory organization D. Rates used by competitors

B. Insurer X's own experience in the state

Sam builds single- and two-seat airplanes in his garage. He takes every care to be sure he stores fuels safely, has fire suppression equipment in place, and minimizes any noise associated with testing the engines. One day, an engine explodes during testing, releasing oil and airplane fuel that flow onto his neighbor's property. Which one of the following characteristics of ultrahazardous activities existed? A. It involves activities that should normally be undertaken in an industrial environment. B. It involved a dangerous substance that was brought onto real property and escaped, causing damage. C. The manufacturer of the airplane fuel created a product that was inherently dangerous. D. It involved aviation which, by definition, is automatically a strict liability situation.

B. It involved a dangerous substance that was brought onto real property and escaped, causing damage.

Which one of the following is true about risk-based capital? A. It is not flexible in its application. B. It is based on an insurer's size and risk profile. C. The insurer's asset size is the primary determinant. D. It is not used by regulators.

B. It is based on an insurer's size and risk profile.

Megan owns two cars, one that is insured with a Personal Auto Policy (PAP) and one that is not insured at all. While driving the uninsured car, she is injured in an accident with an at-fault uninsured driver. Megan makes a claim under her uninsured motorist (UM) coverage. Which one of the following statements is true? A. Megan is entitled to UM coverage in this situation pursuant to the UM Insuring Agreement. B. Megan is not entitled to UM coverage because of the Owned But Not Insured Vehicle exclusion. C. Megan is entitled to UM coverage pursuant to an exception to the Owned But Not Insured Vehicle exclusion. D. Megan is not entitled to UM coverage because of the Owned Vehicle With Primary UM Coverage in Other Policy exclusion.

B. Megan is not entitled to UM coverage because of the Owned But Not Insured Vehicle exclusion.

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

B. Nuisance, and he can be liable for discharging water on the road, but Katie is not.

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

B. One

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

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

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

B. Outrageous conduct.

To provide protection against seizure of assets, currency inconvertibility, and interference with contractual performance, a firm conducting operations in a foreign country would purchase A. Foreign pollution insurance. B. Political risk insurance. C. Foreign personal injury insurance. D. War risk insurance.

B. Political risk insurance. Political risk insurance is a specialized coverage that provides protection against seizure of assets, currency inconvertibility, and interference with contractual performance.

A state insurance department is concerned about how expensive auto liability coverage has become in its state. The form of regulation that would best enable the insurance department to control the rates charged consumers is A. Open competition. B. Prior approval. C. Use and file. D. Flex rating.

B. Prior approval.

Which one of the following is a way for regulators to minimize wide swings in the underwriting cycle? A. Increase insurance rates significantly B. Reduce the lag time in the rate approval process C. Not call attention to whether a market is hard or soft D. Order that certain insurers withdraw from their markets

B. Reduce the lag time in the rate approval process

Certain doctrines in tort law allow a court to infer negligence without direct evidence. When a defendant was probably negligent, under the given circumstances, and the defendant had exclusive control of the instrument that caused harm, courts will often apply the doctrine of A. The "but for" rule. B. Res ipsa loquitur. C. Negligent entrustment. D. Negligence per se.

B. Res ipsa loquitur.

Which one of the following rating mechanisms would produce a rate that most closely matches the insured's actual loss experience under an insurance policy? A. Experience rating B. Retrospective rating C. Classification rating D. Schedule rating

B. Retrospective rating

Which one of these tort reform measures reduces the time period within which a plaintiff can sue and encourages plaintiffs to sue while evidence and witnesses are still available? A. Structured settlements B. Statutes of repose C. Caps on damages D. Pretrial screening panels

B. Statutes of repose Correct. Statutes of repose reduces the time period within which a plaintiff can sue and encourages plaintiffs to sue while evidence and witnesses are still available.

All of the following are included as insureds for the Setion II—Liability Coverages of a homeowners policy, EXCEPT: A. The 19-year-old exchange student who temporarily lives with and under the care of the named insured and his spouse B. The homeowners association that sends a loss assessment bill to the named insured C. The named insured's 17-year-old foster child D. The named insured's neighbor while caring for the insured's dog if the dog causes injury while in the neighbor's care

B. The homeowners association that sends a loss assessment bill to the named insured

Which one of the following statements is correct with respect to the Recovered Property condition of the Building and Personal Property Coverage Form (BPP)? A. When property is recovered, the insurer need not notify the insured and may dispose of the property as it sees fit. B. The insured has the option of taking the recovered property and refunding the loss payment to the insurer. C. If property is recovered, the insured must accept the recovered property and refund the loss payment, less the cost of recovering and repairing the property, to the insurer. D. Recovered property is returned to the insured, who has no obligation to return the loss payment to the insurer.

B. The insured has the option of taking the recovered property and refunding the loss payment to the insurer.

Why are manuscript policies not generally considered contracts of adhesion? A. The manuscript policy has numerous court interpretations. B. The insurer and insured develop policy language together. C. Courts automatically interpret ambiguous policy provisions in the insureds favor. D. The wording of the policy is adapted from previously developed forms.

B. The insurer and insured develop policy language together.

Generally, an injunction is most commonly used for which one of the following purposes? A. To order performance of services. B. To compel a party not to act. C. To compensate a victim. D. To prevent irreparable harm.

B. To compel a party not to act.

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

B. To require the release of information

Current assumption whole life insurance includes features of a A. Variable universal life policy and a term policy. B. Traditional whole life policy and a universal life policy. C. Traditional whole life policy and a first-to-die (joint) life policy. D. Term policy and a traditional whole life policy.

B. Traditional whole life policy and a universal life policy.

Under the foreseeability rule, can a defendant be liable for harm that the defendant did not foresee? A. No, because the foreseeability rule says that the plaintiff's harm must have been foreseeable by the particular defendant. B. Yes, the foreseeability rule permits liability where a reasonable person would have foreseen the outcome, even if the defendant did not. C. Yes, the foreseeability rule says that the plaintiff's harm must be foreseeable by the particular jury members. D. No, but the foreseeability rule only applies to especially bizarre or unexpected circumstances.

B. Yes, the foreseeability rule permits liability where a reasonable person would have foreseen the outcome, even if the defendant did not.

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

C. $20 $20. While a 48-hour waiting period applies to total theft losses under OTC coverage, a 24-hour waiting period applies to loss by other perils under both collision and OTC.

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

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

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

C. A breach of a legal duty

One of the effects of the Personal Injury Coverage endorsement on an HO-3 policy is to A. Add liability coverage for medical payments. B. Add definitions for bodily injury and property damage. C. Add the definition of personal injury. D. Add liability coverage for bodily injury.

C. Add the definition of personal injury.

Sarah lost the use of her right foot when on her 10th birthday she entered a convenience store and the automatic door malfunctioned and caught Sarah's foot and crushed it. The court awarded Sarah damages for her medical costs as well as for her extensive pain and suffering. The pain and suffering damages are A. Exemplary damages. B. Special damages. C. General damages. D. Nominal damages.

C. General damages.

Grace owns two vehicles that are insured under her Personal Auto Policy (PAP). One of the vehicles is covered for both collision and other than collision (OTC). The other is covered only for OTC. The collision deductible is $500, and the OTC deductible is $250. Grace borrowed her neighbor Helen's vehicle one day to run an errand while both of her vehicles were unavailable. On her way home, she lost control of the vehicle and hit a tree. There were no serious injuries, but the damage to the vehicle was $5,000. Helen's PAP covers the vehicle for OTC coverage only, subject to a $250 deductible. Which one of the following statements regarding this scenario is true? A. Grace's PAP insurer will pay $4,750 for this loss. B. There is no coverage available under either Grace's PAP or Helen's PAP. C. Grace's PAP insurer will pay $4,500 for this loss. D. Helen's PAP insurer will pay $4,750.

C. Grace's PAP insurer will pay $4,500 for this loss. Correct. If a nonowned auto is damaged by a covered cause of loss, the PAP provides the broadest coverage applicable to any covered auto shown in the declarations. Grace's PAP insurer will pay $4,500 ($5,000 - $500 deductible) for this loss.

Which one of the following statements is correct with respect to the ISO Earthquake and Volcanic Eruption Endorsement? A. It is not available for commercial buildings and can be attached only to residential insurance policies. B. The maximum limit under the endorsement is $500,000 per building and $500,000 for the contents of a building. C. It includes coverage for the full policy limit and contains a coinsurance clause. D. It is used to exclude coverage for earthquake and volcanic eruption under the commercial property coverage part.

C. It includes coverage for the full policy limit and contains a coinsurance clause.

In response to the controversy over contingency fees for litigation funding, what legislation have many U.S. states passed? A. Legislation that requires the use of the "loser pays" rule in litigation as opposed to contingency fee arrangements B. Legislation that caps contingency fees when money awards reach a specified level C. Legislation that requires "sliding scale" percentages that decrease as the amount awarded in litigation increases D. Legislation that prohibits the use of contingency fee arrangements in litigation

C. Legislation that requires "sliding scale" percentages that decrease as the amount awarded in litigation increases Correct. In response to the controversy over contingency fees for litigation funding, many U.S. states have passed legislation that requires "sliding scale" percentages that decrease as the amount awarded in litigation increases.

Which one of the following statements is true regarding loss reserves and the unearned premium reserve? A. Loss reserves cover claim obligations, while the unearned premium reserve covers only unearned premiums and not claim obligations. B. A deficiency in one of these types of reserves indicates a deficiency in the other type. C. Loss reserves and the unearned premium reserve cover different portions of claim obligations with no overlap. D. Both loss reserves and the unearned premium reserve cover claim obligations with some overlap.

C. Loss reserves and the unearned premium reserve cover different portions of claim obligations with no overlap.

Millwright Kitchen Tools supplies stainless steel can openers; however, it uses other manufacturing companies to make its products. Distribution is through Millwright. Chloe used one of Millwright's can openers that malfunctioned and injured her index finger severely. It is not known which manufacturer for Millwright produced the defective can opener. Which one of the following types of expanded liability could be applied to Chloe's accident? A. Joint-action liability B. Concert of action C. Market-share liability D. Multiple-action liability

C. Market-share liability Market-share liability applies when a product that has harmed a consumer cannot be traced to a single manufacturer. They are liable unless they can prove they could not have made the product involved.

The act of leaving a dangerous article such as a gun or car with a person who the lender knows, or should know, is likely to use it in an unreasonably risky manner is known as A. Contributory negligence. B. The dangerous instrumentality doctrine. C. Negligent entrustment. D. Negligent supervision.

C. Negligent entrustment.

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

C. Readability standards

Officials generally required to obtain public official bonds include those whose duties involve which one of the following? A. Paying of court judgments if appeals fail. B. Exercising a privilege in connection with a business. C. Seizing or disposing of property. D. Guaranteeing that work will be completed according to the contract.

C. Seizing or disposing of property. Public official bonds are often required for officials who seize or dispose of property or are involved in other duties that could result in the violation of the rights of others.

Which one of the following is a defense to fraud? A. The plaintiff had knowledge of the detriment B. The statement was false C. The defendant did not intend to deceive D. The plaintiff did rely on the statement

C. The defendant did not intend to deceive The defendant must make the representation with the intent to influence the other party's action. If the defendant did not intend to deceive, that is a defense to fraud.

Which one of the following is the primary benefit that the doctrine of res ipsa loquitur offers plaintiffs? A. The doctrine heightens the reasonable person standard, making it more difficult for a defendant to prove that negligence did not occur. B. The doctrine permits plaintiffs to successfully sue multiple defendants, even if the plaintiff cannot identify a particular defendant as the liable party. C. The doctrine permits an inference of negligence if the action causing injury was under the defendant's exclusive control and the accident very probably occurred due to negligence. D. The doctrine permits the jury to presume the defendant did not exercise due care, in the absence of significant evidence to the contrary.

C. The doctrine permits an inference of negligence if the action causing injury was under the defendant's exclusive control and the accident very probably occurred due to negligence.

A person injured as a result of a tort may file a lawsuit against the accused wrongdoer, known as the A. Lex loci. B. Lex fori. C. Tortfeasor. D. Significant contact.

C. Tortfeasor.

A homeowner added an aboveground swimming pool and a slide to his backyard. Worried that this pool might attract nosy neighbors, the homeowner posted several 'No Trespassing' signs. The area around the pool was usually slippery, and the homeowner did not have a fence or a gate to keep trespassers out of his yard. Which one of the following best describes the liability that the homeowner would face if a child trespassed onto the property and was injured by the pool? A. Under the hidden dangers doctrine, the homeowner can be liable for injuries to trespassers that occur in an unmarked artificial body of water. B. Under the natural conditions immunity, the homeowner has no duty to warn trespassers of any danger on his land. C. Under the attractive nuisance doctrine, the homeowner can be liable for injuries to trespassing children caused by his unsafe pool. D. Under the artificial conditions immunity, the homeowner is immune to liability because his property was clearly marked 'No Trespassing.'

C. Under the attractive nuisance doctrine, the homeowner can be liable for injuries to trespassing children caused by his unsafe pool.

If the Replacement Cost optional coverage of the Building and Personal Property Coverage Form (BPP) is selected, tenants' improvements and betterments are A. Specifically excluded from replacement cost coverage and valued at ACV only. B. Not covered because replacement cost coverage does not apply to buildings or their fixtures and fittings. C. Valued at replacement cost if the tenant actually repairs or replaces them, at its own cost, as soon as reasonably possible after the loss. D. Valued on a replacement cost basis regardless of whether the tenant elects to replace them or not.

C. Valued at replacement cost if the tenant actually repairs or replaces them, at its own cost, as soon as reasonably possible after the loss.

Since passage of the McCarran-Ferguson Act of 1945, federal laws have governed insurance only in prescribed circumstances. Which one of the following is one of these circumstances? A. When national banks underwrite insurance B. When a state's laws are administered unfairly and unreasonably to the detriment of the public C. When a state has no law that regulates an aspect of the business of insurance covered by a federal law D. When bank-related firms sell insurance on the same basis as insurance producers

C. When a state has no law that regulates an aspect of the business of insurance covered by a federal law

In recent years, expansion of class action litigation to other countries and class action reforms adopted by the United States have caused some U.S. personal injury attorneys to A. Pursue all of their class action cases in foreign countries. B. Abandon their practices in personal injury law in the U.S. C. Push for U.S. tort reform that is more favorable to attorneys practicing in personal injury law. D. "Forum shop" beyond the borders of their own countries to find the most favorable venue.

D. "Forum shop" beyond the borders of their own countries to find the most favorable venue. Correct. In recent years, expansion of class action litigation to other countries and class action reforms adopted by the United States have caused some U.S. personal injury attorneys to "forum shop" beyond the borders of their own countries to find the most favorable venue.

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

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

Which one of the following is a defense against conversion? A. Defendant acted in good faith B. Defendant had the property in its possession the entire time C. Plaintiff demanded return of the property D. A plaintiff's failure to establish the right of possession of the property

D. A plaintiff's failure to establish the right of possession of the property

Regulators protect insurance consumers from which one of the following producers' behaviors? A. A producer may require its insureds to call the insurer's claim office directly to report all claims. B. A producer may advise a client not to purchase insurance, but to self-insure using its other investment products. C. A producer may refuse to use software that is endorsed and installed by an insurer the agent represents. D. A producer may misrepresent the nature of protection offered by the policy to make a sale.

D. A producer may misrepresent the nature of protection offered by the policy to make a sale.

Which one of the following is an example of premium earned before it is written? A. Extended reporting endorsement premiums. B. Large deductible credits. C. Reinsurance premiums. D. Audit premium.

D. Audit premium.

Torts include intentional civil wrongs against property as well as civil wrongs against people. Which one of the following is an intentional civil wrong against property? A. Nuisance B. Assault C. Invasion of right of privacy D. Conversion

D. Conversion

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

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

Omicron Incorporated is insured under an ISO commercial property policy and an ISO equipment breakdown policy. Both policies include the Other Insurance provision. In the case of a loss for which both policies provide coverage under the same plan, terms, and conditions, which one of the following statements is correct? A. Omicron can collect the full amount of the loss under both policies. B. The ISO commercial property policy becomes primary and the equipment breakdown policy becomes excess. C. The policy that has been in force the longest becomes primary and the other policy becomes excess. D. Each policy pays in relation to all applicable policies.

D. Each policy pays in relation to all applicable policies.

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

D. Flex rating.

Determining which law to apply in a transitory tort case depends on the place where the party sues, known as the A. Transitory cause of action. B. Statutory enactment. C. Provincial rule. D. Forum jurisdiction.

D. Forum jurisdiction.

Which one of the following is a type of administrative agency rule that describes the meaning of statutes to provide guidance for agency staff or regulated parties? A. Procedural rule B. Legislative rule C. Substantive rule D. Interpretative rule

D. Interpretative rule

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

D. It permits the insured to extend "your business personal property" to include trailers leased to expand office space or to provide additional storage or work areas.

Research concerning the insurance rating approaches of noncompetitive rating (NCR) and competitive rating (CR) has found A. Little evidence that NCR laws tend to narrow the range of prices. B. NCR requirements eliminate delay in obtaining rate relief. C. Conclusive evidence that NCR jurisdictions have lower loss ratios than CR jurisdictions. D. Little evidence that excessive pricing occurs in the absence of an NCR law.

D. Little evidence that excessive pricing occurs in the absence of an NCR law.

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

D. Local.

Which one of the following is a category of the tort of nuisance? A. Nuisance discomfort B. Unlawful nuisance C. Nuisance invasion D. Nuisance per se

D. Nuisance per se

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

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

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

D. Open competition, use and file, prior approval

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

D. Other insurance in a similar policy

Anna owns a pick-up truck which is insured under a Personal Auto Policy (PAP). She is planning on taking a six month trip, and wants to check the coverage territory for her PAP. Which one of the following sections of the PAP will provide Anna with information about the policy territory? Select one: A. Part E—Duties After an Accident or Loss B. Agreement and Definitions C. Declarations D. Part F—General Provisions

D. Part F—General Provisions

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

D. Promptly notify police if a covered auto is stolen A is additional duty for UM coverage. For Part D, must notify policy if auto is stolen so that possibility of vehicle being recovered is increased.

Which one of the following is a benefit insurance provides to individuals, families, businesses, and society as a whole? A. Increasing social burdens B. Eliminating the need for loss control activities C. Eliminating uncertainty about potential future losses D. Providing support for credit

D. Providing support for credit

Which one of the following is a source for bad faith cause of action? A. Promptness in a claim investigation B. Unfair decrease in premium C. Cancellation for nonpayment of premium D. Retaliatory cancellations

D. Retaliatory cancellations

Under the maxim Restitutio in Integrum, a plaintiff in a negligence action is entitled to damages in an amount of money that will A. Restore the parties integrity under the circumstances. B. Act as punishment for a defendant acting egregiously. C. Mitigate the plaintiff's damages and thus provide a defense for the negligent defendant. D. Return the plaintiff to a position which would have existed had there been no accident.

D. Return the plaintiff to a position which would have existed had there been no accident. The fundamental principle is that the plaintiff in an action for negligence is entitled to a sum of damages that will return the plaintiff to the position the plaintiff would have been in had the accident not occurred, in so far as money is capable of doing this.

Which one of the following describes a process that analyzes the rulings from several legal authorities to create a new case law that is applied to a new legal situation? A. Legislation B. Precedent C. Stare decisis D. Synthesis

D. Synthesis

Paul and Jerry were both six years old when they entered a neighbor's home and used baseball bats to smash and break household items. When establishing liability for Paul's and Jerry's actions, the court will most likely primarily consider A. It to be liability by conspiracy. B. It as a mass tort action. C. Their vicarious liability as children. D. The tortfeasors' capacity.

D. The tortfeasors' capacity.

Eric purchased an air pistol advertised as suitable for 12 year olds and above for his 14-year-old son Jim. He read all of product information and properly attached the air cartridge and instructed Jim on how to load and shoot. Jim let six-year-old Tommy use the gun and Tommy accidentally shot Jim in the ear causing him to lose his hearing. In determining liability, a court of law is most likely to consider which one of the following factors as most significant? A. Whether Jim was guilty of negligent entrustment B. Whether the harm was intended C. Whether there was a defect in manufacture, design, or assembly D. Whether the harm was foreseeable

D. Whether the harm was foreseeable

Dale's Dive Shop rents a 20-foot boat for an employee outing. While Dale is driving the boat on a lake, he accidentally injures a swimmer. Does Dale's Commercial General Liability (CGL) Coverage Form cover the swimmer's bodily injury? A. No, because bodily injury arising out of use of watercraft is excluded B. No, because the injury did not occur as a result of business operations C. Yes, because the mobile equipment exclusion is very narrow D. Yes, because this watercraft qualifies as an exception to the watercraft exclusion

D. Yes, because this watercraft qualifies as an exception to the watercraft exclusion