P&C License Practice exam #1

Christina's hunting cabin in West Virginia has been appraised at $200,000. Christina has the cabin covered by a Dwelling policy and the full limit of the policy is $175,000. The kitchen catches fire and burns a large portion of the structure, creating a $100,000 loss. Because West Virginia has a "valued policy law", Christina can expect to receive ________ from her insurer.

$100,000.

An insurance professional commits an act of insurance fraud covered by the Federal Insurance Fraud & False Statements Act. The fraud does not affect the financial stability of the company. What is the maximum time the adjuster may be confined to prison?

10 years.

Under a standardized Dwelling form, a loss by a covered peril for Improvements, Alterations and Additions is covered for up to:

10% of the Coverage C limit of liability.

Under the 1943 New York Standard Fire policy, the appraisal clause indicates that each party in a dispute must select an impartial appraiser within:

20 days. The SFP appraisal clause requires each party to select their appraiser within 20 days after the written demand of the other party.

A Business Auto policy covers trailers with a load capacity of:

2000 lbs or less

All licensees in West Virginia are required to notify the Insurance Commissioner of any change in address within ______ of such change.

30 days EXPLANATION: This regulation enables the Insurance Department to contact agents as necessary.

Insurers issuing residential property insurance in West Virginia are required to notify an insured of their intention to nonrenew the policy:

30 days before the renewal date

How many continuing education credit hours in excess of the required number of hours may be carried over into the next reporting period by an agent or producer in West Virginia?

6 hours

Payment for a covered loss under the 1943 New York Standard Fire policy must be made within ______ days after a satisfactory proof of loss has been received by the insurer.

60 Days

When the insurance company broadens the coverage of their Personal Umbrella policies the change will automatically be included in all Personal Umbrella policy on the date the change is made. However, the date of the change must fall within _______ prior to or during the policy period that is stated on the Declarations page.

60 days For the liberalization clause to apply, the date of the policy change (broadening of coverage at no extra premium) must fall within 60 days prior to or during the policy period that is stated on the Declarations page.

For restaurants to be eligible for coverage by the standard BOP policy, they cannot exceed _______ in total floor area.

7500 SQ feet

No insurance binder in West Virginia may be valid beyond the issuance of the policy with respect to which it was given, and no agent or insurer may issue a binder covering a period in excess of _____ days from its effective date.

90

All of the following perils are covered for collapse under the Commercial Property additional coverage, EXCEPT:

A building that is in danger of collapsing.

Which of the following initiates a lawsuit to deal with a liability insurance claim dispute

A complaint. is correct. EXPLANATION: To initiate a lawsuit to deal with a liability insurance claim dispute, a "complaint" is issued. While the "proof of loss" or "statement of the claim" is PART of the complaint, it is not the complaint itself.

The standardized personal automobile policy considers a "newly acquired auto" to be:

A covered auto for the first 14 days.

The West Virginia Comparative Fault statute mentions the "trier of fact". This means:

A judge or jury

Which of the following alleged cases of negligence is more likely to be valid?

A large oak tree in Wilbur's yard was struck by lightning. A limb was severed and remained suspended across two other limbs. Three months later, it fell and hit a neighbor's car. Wilber was sued for negligence.

All of the following may have insurable interest in property covered by an insurance policy, EXCEPT:

A neighbor whose property is adjacent to the insured's property for loss to their dwelling when siding from the insured's house hits and damages the neighbor's house.

The insured has filed a claim under the "Business Income Dependent Properties -- Broad Form" because the primary buyer of products and services from the business has filed for bankruptcy. Under this form, the primary buyer's business would be known as:

A recipient location. is correct. EXPLANATION: The primary buyer's business would be known as a "recipient location".

An insured's car is damaged in an auto accident. While it is being repaired, the body shop loans the insured a replacement. Under the standard Personal Auto policy, this replacement vehicle is known as:

A temporary substitute.

Under the Gramm-Leach-Bliley Act, there is a "pretexting provision". What is the definition of "pretexting"?

Accessing private information using false pretenses.

An insurer that was chartered under the laws of a Canadian province but conducting business in Minnesota, would be considered a(n) ________________ insurer by the Minnesota Department of Insurance:

Alien Insurance companies domiciled/chartered outside the borders of the United States but are admitted to conduct business in a state or territory of the United States are known as alien insurance companies in those states.

A written insurance contract that includes all coverage forms and endorsements is known as:

An Insurance Policy

A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system and the water from the sprinklers, soaks the carpet and shorts-out all the computers, causing thousands of dollars in damage. The office must close for two months during repairs. The cost of renting a temporary office space while the physical damage to the office building is repaired is considered to be:

An indirect loss. An indirect loss is created when a direct loss has created a situation when damaged property cannot be used. The cost of renting temporary office space because the damaged space is unusable, is an indirect loss, sometimes known as a consequential loss.

The Terrorism Risk Insurance Act and all of its extensions and reauthorizations is actually an agreement:

Between the Federal Government and insurance companies. The Terrorism Risk Insurance Act is an agreement between the Federal Government and insurance companies to provide coverage for acts of terrorism.

Natalie has been injured by a blender that turned out to be unsafe when she used it. She has decided to file a lawsuit against the manufacturer for damages. Which of the following is NOT grounds for which Natalie may bring the lawsuit?

Breach of Contract

Which of the following injured workers would NOT be eligible for workers' compensation benefits according to West Virginia law?

Cindy, an accountant hired under contract to assist with warehouse inventory numbers

Entering into any agreement to commit, or by any concerted action committing, any act resulting in or tending to result in unreasonable restraint of the business of insurance is an example of:

Coercion

A new homeowner is being forced into purchasing insurance from a particular insurance company as a condition for receiving a mortgage. The mortgage lender is guilty of which of the following?

Coercion.

A Farm Property policy with the basic causes of loss selected would include coverage for all of the following perils, EXCEPT:

Collapse. "Collapse" is a broad cause of loss peril, not a basic peril.

With a Commercial Package Policy, a combination of forms and endorsements that provide a particular line of coverage is referred to as a:

Coverage part.

Which of the following would be included in the definition of "mine subsidence" in West Virginia?

Damage to a structure caused by the collapse of a coal mine.

Debra is a licensed insurance agent in West Virginia. She appointed Tom a few years ago to work for her as an insurance solicitor. Over the past year, Tom's work has been lacking and Debra would like to terminate his appointment. Which of the following is the proper procedure for Debra?

Debra must make a written request to the Commissioner to have Tom's solicitor's license cancelled. EXPLANATION: Any license insurance agent who has hired a solicitor, must make a written request to the Commissioner that the solicitor's license be cancelled if that agent terminates the employment of the solicitor. Any time an insurance solicitor is hired in West Virginia, the solicitor's license is tied to the appointing agent's license. If the appointing agent's license is revoked, the solicitor's license would be revoked as well.

If the Value Reporting Form Endorsement is attached to a Commercial Property policy, business personal property is covered at all of the following locations, EXCEPT:

Exhibition

Insurance law recognizes two types of waivers. They are:

Express / Implied

All of the following are exclusions under the Standard Fire policy, EXCEPT:

Fire damage that is the result of a riot.

Which of the following is NOT typically covered under a property insurance policy?

Flood.

Monique's house is covered in brick veneer. Monique's house is which of the following types of construction?

Frame. is correct. EXPLANATION: Brick or any other type of veneer is placed over "frame" construction.

All of the following are perils NOT typically covered by property cause of loss forms, EXCEPT:

Hail.

Perry has his home covered under an HO-5 policy. He borrows a friend's expensive camera and takes it on vacation, where it is stolen. Coverage for the stolen camera is:

Included anywhere in the world

Torts that can be covered by insurance policies include all of the following, EXCEPT:

Intentional torts purposely committed to cause harm to another.

he term "fault" as defined under the West Virginia Comparative Fault statute may include all of the following, EXCEPT:

Intervening cause. The West Virginia Comparative Fault statute does not include "intervening cause" as part of the definition of "fault".

Agencies in West Virginia are required to have an agency producer license that expires annually on:

June 30th

If the Standard Fire policy is issued with the extended coverage endorsement attached, coverage will be provided for all of the following, EXCEPT:

Law and Ordinance.

The Watercraft Endorsement to the Homeowners policy provides:

Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy. The Watercraft Endorsement provides Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy for watercraft.

All of the following statements are TRUE of liability insurance, EXCEPT:

Liability insurance provides indemnification for the insured. EXPLANATION: The statement that is NOT true is that Liability insurance provides indemnification for the insured.

Which of the following describes a "peril"?

Lightning that stikes a house and destroys electronic equipment inside. Lightning is the only "peril" in the answer choices because the lightning actually caused the loss. The other three choices are "hazards" that may increase the chance of a loss, but they have not caused a loss.

All of the following are general exclusions of all the Dwelling forms for Coverages A & B, EXCEPT:

Loss caused by the explosion of a water heater in the insured dwelling

A legal term describing an intentional act that is illegal or morally wrong, and contributes to the injury of another person is: Your answer: A crime. is incorrect. The correct answe

Malfeasance.

Which of the following would be considered "economic losses" that could result in compensatory special damages being awarded in a negligence case?

Medical expense and lost wages

All of the following situations involve misrepresentation, EXCEPT

Michael manages an insurance agency and posts the sales numbers of all agents publicly each month, to promote competition.

All of the following are included in the definition of "auto" under the Business Auto policy, EXCEPT:

Mobile Equipment

Which of the following common law defenses of employers with regard to workers' compensation claims is specifically barred from use by the laws of some states?

Negligence of a fellow worker. EXPLANATION: The negligence of a fellow worker is a common law defense of employers that the laws of several states bar it from being used.

Farmer Olivia makes apple butter from the apples she grows on her farm. She puts the apple butter in decorative jars and takes them to Grandma's Country Store to sell them. For Grandma's to be covered for any liability arising from the sale of Olivia's apple butter:

Olivia must add an "Additional Insured Farm Liability" endorsement to her Farm Liability policy. For Grandma's Country store to have coverage for any liability arising from the sale of Olivia's apple butter, Olivia must add an "Additional Insured Farm Liability" endorsement to her Farm Liability policy.

The West Virginia insurance code permits insurers to alter the New York SFP:

On the first page only

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

Only a portion of a partial loss will be paid. If the insured's policy contains a coinsurance clause and the insured carries less than the percentage of the value of the property required, a penalty will occur in case of partial losses. This "penalty" is that the insured will not receive as much in their claim payment as they would have if the coinsurance requirement had been met.

With a work-related injury, the loss of a finger would be characterized as what type of disability?

Permanent partial disability.

Which of the following best defines a "direct loss" under a property insurance policy?

Physical harm to property that is the direct result of a peril. The definition "physical harm to property that is the direct result of a peril" best describes a direct loss.

Which of the following types of insurance would be covered by the West Virginia Insurance Guaranty Association?

Property insurance.

Private, unincorporated mutual insurers that consist of associations that agree to equally share risks among its members are known as:

Reciprocal exchanges

The West Virginia Fire Marshal may require an insurance company to release information related to a fire loss. This information may include all of the following, EXCEPT:

Reserve amount for the fire loss.

The principle of indemnity is illustrated by which of the following?

Restores an insured to the same condition enjoyed before a los

Which of the following statements is TRUE regarding the sections of a Homeowners policy?

Section I coverages vary greatly between the different HO forms.

Which of the following would NOT be covered under the "Outside The Premises" insuring agreement of a Crime policy?

Securities deposited with others. Securities deposited with others is NOT covered under the "Outside the Premises" insuring agreement of a Crime policy.

A non-appointed producer in West Virginia may perform all of the functions of an insurance transaction, EXCEPT:

Sign the policy.

Which of the following statements is TRUE about the Standard Fire Policy?

The Standard Fire policy is no longer used in its original format.

The maximum amount a liability policy will pay for all occurrences taking place during the policy period, is known as:

The aggregate limit. EXPLANATION: The aggregate limit is the maximum amount the policy will pay for all occurrences that take place during the policy period. When the aggregate limit is reached, the insured no longer has coverage under the policy.

Which of the following is the PRIMARY source of information used by insurance companies during the underwriting process?

The application for insurance.

Which of the following statements is TRUE regarding an ERISA fidelity bond?

The bond cannot be issued for less than $1,000. The only TRUE statement about an ERISA bond is that is cannot be issued for less than $1,000.

Which of the following losses would be covered by the EC peril of "volcanic eruption" under a standard Dwelling form?

The exterior siding of the dwelling that was ruined by the ash that settled on it from the erupting volca

The form settles all losses at actual cash value.The form allows for vacancy of 60 days before coverage will no longer apply.The form does not include a coinsurance clause.Coverage under this form is written for a period of one year.

The form allows for vacancy of 60 days before coverage will no longer apply. The only statement in the answer choices that is NOT TRUE is: "The form allows for vacancy of 60 days before coverage will no longer apply." The form does not contain a vacancy clause because buildings under construction are not considered vacant.

Following the payment of a claim, the salvaged property becomes the property of:

The insurer

When the triggering event threshold has been met under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA), the insurer's deductible amount:

The insurer's deductible is calculated at 20% of the insurer's direct earned premiums for commercial insurance.

All of the following statements are TRUE with regard to punitive damages, EXCEPT:

They are awarded in such a high amount that the court will not award compensatory damages to the plaintiff because they are no longer necessary. Punitive damages do NOT replace any compensatory damages awarded by the court. Punitive damages are awarded in addition to compensatory damages.

All of the following statements regarding insurance brokers are correct, EXCEPT:

They have the power to bind coverage with insurers.

The Insurance Commissioner may call a hearing to see if any person has violated West Virginia insurance statutes and regulations. The Commissioner may also call a hearing:

To secure information useful in the lawful administration of his or her duties.

Which of the following terms is used to describe a contract where the insurance company is the only party to the contract that is legally bound to perform its part of the agreement?

Unilateral.

All of the following are reasonable duties of care that are required of employers with regard to workers' compensation, EXCEPT:

Warn workers of obvious dangers.

Which of the following statements is TRUE regarding Coverage F - Medical Payments to Others on the Homeowners policies?

Which of the following statements is TRUE regarding Coverage F - Medical Payments to Others on the Homeowners policies? Pays the medical expenses of others without regard to whether or not the insured was negligent.

Which of the following is true regarding pure and speculative risks?

With pure risk there is only the possibility of loss

Pam's Pampered Pets" is reviewing their workers' compensation policy and would like to confirm the states in which their employees will be covered while working. Which section of the standardized policy form should they review?

part 3 Part Three of the standardized NCCI workers' compensation form contains the "Other States" coverage.

Which of the following is a TRUE statement regarding how bullion and manuscripts are covered under the 1943 New York Standard Fire policy?

Bullion or manuscripts may be covered, but only if they are specifically named in the policy

Under Part C - Uninsured Motorist Coverage of the Personal Automobile Policy, the definition of an "uninsured vehicle" is one that is driven by a hit-and-run driver in all of the following situations, EXCEPT:

The hit-and-run driver strikes the insured's home and damages it. Part C - Uninsured motorist covers bodily injury only. It does not cover property damage.

In West Virginia, certain licensees are exempt from the continuing education requirements. That exemption applies to:

Persons holding a resident license for any limited lines of insurance for which an examination is not required by the Commissioner.

Which of the following is TRUE regarding nuclear energy loss coverage under a Personal Automobile policy?

The personal automobile policy will not provide coverage for bodily injury or property damage caused by the insured's nuclear energy losses.

Which of the following situations would NOT be considered an unfair claim settlement practice according to the NAIC Model Act?

Indemnify Insurance pays thousands of claims per year, but on two of those claims they failed to accept or deny the claim within the time frame required by state law.

Which of the following best characterizes the difference between captive agents and independent agents?

Independent agents can represent more than one insurer, whereas captive agents represent only one insurer. Independent agents are free to represent as many insurers as they can get appointments with. Captive agents represent only one insurer and may be employed by that insurer.

An insured who had a $500,000 primary liability policy purchased a $1 million Umbrella liability policy with a $2,000 self-insured retention limit. Later, the insured allowed the required underlying primary policy with a limit of $500,000 to expire. A week after that, the insured became liable for a $100,000 loss that is not excluded by the provisions of either the primary underlying liability policy or the Umbrella policy. How will this loss likely be settled?

The insured will be liable for the full $100,000 loss. Because the insured allowed the required underlying policy to expire, he is responsible for the $100,000 loss. The Umbrella policy does not recognize a reduction in the underlying limits nor the non-renewal of underlying coverage as a trigger to cover the claim. This means the insured must pay the underlying limits in order for the Umbrella policy to pay its portion of the loss.

Joe makes a small down payment on a sports car and finances the remainder of the cost of the car with Benevolent Bank, Inc. He also purchases a standard Personal Automobile policy through Binders Keepers Insurance Company to cover the car. Joe makes one car payment before he is caught with $200,000 of drugs in the car on his way to deliver it to addicts for money. Joe is arrested and the car is permanently confiscated by the authorities. How will coverage apply in this situation?

The policy will cover the damage to the body of the automobile on behalf of Benevolent Bank, Inc.

Which of the following would be covered by Section I of the Businessowners policy?

The seizure of the insured's building by the civil authorities in order to stop the spread of fire. The only answer choice that would be covered is: "The seizure of the insured's building by the civil authorities in order to stop the spread of fire." All of the other answer choices were specifically excluded.

The Insurance Commissioner/Director/Superintendent of a given state would refer to an insurance company formed under the laws of a different state as:

A foreign insurer The Insurance Commissioner/Director/Superintendent of a given state would refer to an insurance company formed under the laws of a different state as a foreign insurer. For example, the Superintendent in New York would refer to an insurer that was formed under the laws of Arizona as a "foreign insurer".

An insured has her business automobiles covered under a Business Auto policy with Symbol 7 specified on her Declarations page. She has purchased a trailer with a load capacity of 2,500 pounds and hitched it to a covered van. While she is driving the van, the trailer breaks free and crashes into another vehicle, causing bodily injury. Which of the following statements is true regarding this insured's situation?

Liability coverage is not extended under Symbol 7 for a trailer with a load capacity of more than 2,000 pounds, therefore coverage will not apply.

All of the following statements are true regarding state Guaranty Associations, EXCEPT

The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association.

All of the following statements are true regarding a Personal Umbrella policy, EXCEPT:

The policy can be written as a monoline policy. EXPLANATION: A Personal Umbrella policy cannot be written as a monoline policy, Umbrella policies must always be written to broaden and/or extend the coverage of an underlying liability policy. The underlying policy limits must be exhausted first, even if the underlying limits with exclusions end up being $0.

Supplementary payments under the liability section of a Commercial Auto policy include reasonable expenses incurred by the insured including loss of earnings up to _____ per day.

$250 Reasonable expenses including loss of earnings up to $250 per day if asked to take off work to help the insurer in handling a claim.

Which of the following types of insurance companies is known as a "nonparticipating company" because they do not pay their policyholders a dividend?

: A stock insurance company.

Brianna is applying for a new job at General Hospital. Which law limits how much information Brianna's bank and mortgage lender can share with General Hospital, regarding to Brianna's finances and credit score?

: Fair Credit Reporting Act.

Gavin, the named insured under a Personal Auto policy, his daughter Tabitha, and two of her friends are riding in the covered auto when Gavin accidentally runs a stop sign, striking another vehicle. Everyone in Gavin's vehicle was injured as well as the driver and two passengers in the other car. Who would be covered for their injuries under Part A of Gavin's policy?

The driver and passengers in the other car. Part A - Liability of the personal auto policy would cover the driver and passengers in the other car because Part A covers liability caused by the insured TO A THIRD PARTY.

If a dwelling or commercial building has been without occupants for a significant period of time, but furniture still exists within the dwelling or building, it is considered:

Unoccupied