Practice test 8
A gas line explodes outside of Mindy's Mending Shop, ruining her new landscaping. Which coverage extension of Mindy's Commercial Property policy would cover the cost of replacing the damaged trees and shrubs? "Property On-Premises". "Newly Acquired Property". "Property Off-Premises". "Outdoor Property".
"Outdoor Property". EXPLANATION: The coverage extension "Outdoor Property" adds coverage for trees and shrubs that were excluded in the "property not covered" section of the policy.
The medical suffix "-al" means: "pertaining to the lungs". "a condition". "pertaining to a nerve". "pertaining to hearing".
"pertaining to a nerve".
The New York Automobile Insurance Plan (Assigned Risk Plan) must make Medical Payments coverage available to applicants up to: $500. $2,000. $1,000. $10,000.
$1,000. EXPLANATION: The Plan must offer applicants "medical payments" coverage of up to $1,000 for private passenger automobiles (not for hire), whether or not the insured was legally liable, for bodily injury or death of any person insured.
An insured is covered under a standard Businessowners Policy for replacement cost coverage and has sustained a fire loss to his building. Due to changes in the building codes in his town, it's going to cost $20,000 extra just to comply with the new building codes and make the repairs. How much, if any, will the BOP pay for these extra costs? $10,000. $5,000. $0. $20,000.
$10,000. EXPLANATION: There is a limited amount of $10,000 for the "Increased Cost of Construction" in order to comply with newer ordinances or laws. However, this coverage applies only to buildings insured on a replacement cost basis. Further, the $10,000 coverage cannot be used to pay any costs after a loss for an ordinance or law, that the insured was required to comply with before the loss, but failed do so. It is important to note that the ordinance or law exclusion is still in place, preventing the insured from assuming that the entire policy limit is available to pay these costs to bring the building up to code after a claim. The policy will then provide "Increased Cost of Construction" coverage through an "additional coverage", but these costs are limited to $10,000.
How much coverage is provided under the Businessowners policy coverage extensions for newly acquired business personal property? $100,000. $250,000. $2,500. $10,000.
$100,000. EXPLANATION: There is $100,000 of coverage for newly acquired business personal property under the Businessowners extensions of coverage.
The "triggering event threshold" for the Terrorism Risk Insurance Act of 2002 was: $5 million. $5 billion. $10 million. $10 billion.
$5 million. EXPLANATION: Back in 2002, when TRIA was established, the "triggering event threshold" was $5 million.
A standard Homeowners policy has been issued with a $300,000 limit to cover a four-family dwelling. What is the automatic amount that will be provided for Coverage C? $150,000. $90,000. $75,000. $30,000.
$75,000. EXPLANATION: When a four-family dwelling is covered with a Homeowners policy, 25% of the Coverage A limit is automatically provided for Coverage C - Personal Property coverage. 25% of $300,000 is $75,000.
If a New York insurer wishes to reduce or change the limits of automobile policy that has been in effect for more than 60 days, the insurer must send the insured a written notice at least: 30 days in advance of the change. 20 days in advance of the change. 45 days in advance of the change. 60 days in advance of the change.
20 days in advance of the change. EXPLANATION: The written notice must be sent to the insured 20 days in advance of the change.
Within _____ of the termination of a claims-made commercial liability policy in New York, the insurer must advise the insured regarding supplemental extended reporting period coverage. 14 days. 30 days 60 days. 21 days.
30 days EXPLANATION: Within 30 days, the insurer must advise the insured on the availability of, the premium for, and the importance of purchasing supplemental extended reporting period coverage.
A Commercial Property policy has the "Protective Safeguards" endorsement attached indicating that the insured has protective safeguards installed such as a sprinkler system. Should the system become inoperative, how long does the insured have to report this fact to the insurer? 48 hours. 24 hours. 36 hours. 2 weeks.
48 hours. EXPLANATION: If repairs cannot be completed within 48 hours, the insurer must be notified in order to comply with the conditions of the form.
An additional coverage provided by Part D of the Personal Watercraft policy includes coverage for "salvage liability". This is best described as: A maritime law that states that any salvage from watercraft belongs to the state where the watercraft was being used at the time of the accident. Coverage for damage caused to another vessel by the salvage of the damaged watercraft. A maritime law requiring watercraft owners to recover items that have gone overboard. Coverage for bodily injury caused to others when the covered watercraft collides with another boat or a dock.
A maritime law requiring watercraft owners to recover items that have gone overboard. EXPLANATION: The additional coverage for "salvage liability" refers to a maritime law requiring watercraft owners to recover items that have gone overboard.
Which of the following statements best describes the term "fiduciary". A person who submits a claim to their insurance company. A person who has been bonded as honest and trustworthy. A person who is entrusted with the assets of another. A person who holds a fiduciary's license.
A person who is entrusted with the assets of another. EXPLANATION: Insurance companies, agents, producers and adjusters have a fiduciary responsibility to their clients in the collection and handling of premiums, claim payments, and return of unearned premium. All of these items are "assets" that the fiduciary has been entrusted to handle.
Which of the following flood zones show a "flood depth" instead of a "base flood elevation" on a FIRM? V AO AE VE
AO EXPLANATION: The AO zones are subject to only shallow flooding during the base flood, therefore "flood depths" are shown in these zones.
Indemnify Insurance, Inc. is deploying adjusters to an area recently hit by a hurricane. The company has 25 employee adjusters who are ready to deploy but they need 25 more. Carol is a licensed adjuster who signs a contract with Indemnify Insurance, Inc. to work on their behalf during this deployment. Carol is acting as: An independent adjuster. A public adjuster. A field adjuster. A staff adjuster.
An independent adjuster. EXPLANATION: Carol is being deployed as an independent adjuster under contract (an independent contractor) who is NOT an employee of the insurance company.
All of the following are excluded under a Personal Umbrella policy, EXCEPT: Professional liability. Bodily injury to a third-party resulting from the insured's negligence. Unauthorized or illegal activities involving controlled substances. Damage to the insured's property.
Bodily injury to a third-party resulting from the insured's negligence. EXPLANATION: Bodily injury to a third-party resulting from the insured's negligence is the purpose of purchasing a personal umbrella policy.
Which of the following coverages does NOT need to be added to a Garage Coverage form by endorsement for coverage to apply? Uninsured motorists. Personal injury protection (PIP). Medical payments coverage. Collision.
Collision. EXPLANATION: Collision is covered under the Physical Damage section of the Garage Coverage form.
Which of the following types of coverages are included in the standardized Businessowners policy? Coverage for employer's liability. Coverage for business personal property. Coverage for disability income. Coverage for business automobiles.
Coverage for business personal property. EXPLANATION: The only type of coverage listed in the answer choices that are included with a BOP policy is coverage for business personal property.
A Mobile Equipment endorsement to a New York Personal Automobile policy changes the status of "mobile equipment" to: Miscellaneous-type auto. Recreational vehicle. Commercial-type auto. Covered auto.
Covered auto. EXPLANATION: A Mobile Equipment endorsement to a New York Personal Automobile policy changes the status of "mobile equipment" to "covered auto" or "vehicle covered".
Typically, anyone applying for an insurance license in New York would be denied if he/she has been convicted of a felony involving which of the following? Reliability and a breach of responsibility. Incompetence and lack of knowledge. Poor business reputation and lack of skill. Dishonesty or a breach of trust.
Dishonesty or a breach of trust. EXPLANATION: Typically, anyone applying for an insurance license in New York would be denied if he/she has been convicted of a felony involving dishonesty or a breach of trust.
Which of the following is NOT considered to be a soft tissue injury? Fracture. Bruises. Ligament sprain. Muscle strain.
Fracture. EXPLANATION: A fracture involves the bone, therefore it would not be a soft tissue injury.
The Crime policy insuring agreements "Inside the Premises - Theft of Money and Securities" covers loss of money and securities resulting from all of the following, EXCEPT: Theft. Disappearance. Fraud. Destruction.
Fraud. EXPLANATION: The insuring agreement does not cover "fraud".
Which of the following would NOT be covered under the specified cause of loss physical damage coverage under a Business Auto policy? Fire. Lightning. Glass breakage. Flood.
Glass breakage. EXPLANATION: The specified cause of loss form covers the following perils: fire, lighting, explosion, theft, windstorm, hail, earthquake, flood, vandalism or mischief, transportation by a conveyance. The coverage does not include glass breakage, hitting a bird or animal nor falling objects or missiles.
All of the following statements about the HO-8 are correct, EXCEPT: The policy form is designed for older or historical homes with replacement values that exceed market values. HO-8 covers the dwelling, other structures, and personal property on a named perils basis. HO-8 covers the same named perils as the HO-2. HO-8 is also known as the Modified Coverage Form.
HO-8 covers the same named perils as the HO-2. EXPLANATION: The HO-8 Form provides coverage for the named BASIC perils for Section I. The HO-2 provides coverage for the BASIC and BROAD form perils, making the HO-2 Form broader than the HO-8 Form.
Tort law applies to all of the following, EXCEPT: Liability arising from the commission of an unintentional tort. Liability arising from negligence. Liability arising from a breach of duty. Liability arising from breach of contract.
Liability arising from breach of contract. EXPLANATION: A tort is a civil wrong, not arising from a contract. Contract law is a completely different branch of law.
Which of the following is NOT a general exclusion of all the Dwelling policy forms? Nuclear hazard. Lightning. War. Flood.
Lightning.
An "operations" claim as covered by the Commercial General Liability policy: Must occur on the premises. Must occur off the premises. May occur on or off the premises. Have nothing to do with the premises.
May occur on or off the premises. EXPLANATION: An "operations" claim as covered by the Commercial General Liability policy can occur either on or off the premises.
An air cooling system would be most often found in which of the following types of vehicles? Newer vehicles. High-performance vehicles. Large trucks. Older vehicles.
Older vehicles. EXPLANATION: An air cooling system would be most often found in older vehicles.
PS&D Liability policies include coverage for which of the following? Hospital Professional Liability. Partnership, Association or Corporation Professional Liability. Lawyers Professional Liability. Fiduciary Professional Liability.
Partnership, Association or Corporation Professional Liability. EXPLANATION: PS&D Liability policies include coverage for "Partnership, Association or Corporation Professional Liability
All of the following sections are included on the Business and Personal Property coverage form, EXCEPT: Optional Coverages. Business Personal Property. Coverage Extensions. Perils Insured Against.
Perils Insured Against. EXPLANATION: The perils insured against are including on a cause of loss form that is attached to the Building and Personal Property coverage form, it is not included on the form.
Frank's Furniture, Inc. has hired Harry's Handyman Services, Inc. to repair a staircase leading from the ground floor up to a furniture showroom on the second floor. While performing the repairs, a carpenter working for Harry drops a hammer and injures a Frank's Furniture customer on the first floor. This situation would fall under which exposure of Harry's Commercial General Liability? Contractual liability. Products & Completed Operations liability. Premises & Operations liability. Independent Contractors legal liability.
Premises & Operations liability. EXPLANATION: The situation described in the question falls under the Premises & Operations liability exposure covered by a CGL policy. In this case, the "operations" are on going so the occurrence is not required to have happened on the premises.
The Home Business Insurance Endorsement is available to cover certain businesses, when attached to a Homeowners policy. Which of the following coverages is NOT included on this endorsement form? Professional liability coverage. Coverage for business personal property. Business liability including the products and completed operations coverage. Business income and extra expense coverage.
Professional liability coverage. EXPLANATION: Professional Liability coverage must be insured under a separate policy.
The HO-3 form insures for direct physical loss to covered property involving collapse of a building caused by all of the following, EXCEPT: Hidden decay. Settling. Weight of contents. Use of defective materials.
Settling. EXPLANATION: Settling or earth movement is excluded under the policy.
A 100-year flood is an example of which of the following types of risk? Fundamental risk. Particular risk. Static risk. Dynamic risk.
Static risk. EXPLANATION: Static risk factors tend to be associated with long term risk, such as an area that may only flood every 100 years.
Which of the following NFIP forms provides replacement cost coverage if the building meets the other eligibility requirements for RCV? The Dwelling form only. The Dwelling and RCBAP forms only. The Dwelling, RCBAP, and General Property forms. The General Property form only.
The Dwelling and RCBAP forms only. EXPLANATION: The NFIP Dwelling and RCBAP forms provide loss settlement at replacement cost value only on single-family dwellings.
the human body, which of the following supports the neck? The cervical vertebrae. The sacrum. The thoracic vertebrae. The lumbar vertebrae.
The cervical vertebrae. EXPLANATION: The neck is supported by seven bones known as vertebrae, and this area is known as the cervical area with bones referred to as C-1 through C-7.
Which of the following statements would be a reason for an adjuster to conduct a "claimant investigation"? To determine the claimant's state of mind and willingness to settle without litigation. To ask questions regarding the claimants prior medical history to determine if the injury referenced on the claim was caused by another health problem. To determine the extent of the claimants injuries and if those injuries were caused by the incident that gave rise to the claim. To ask questions regarding the claimants prior claim history to determine if this injury has already been covered under a previous claim.
To determine the extent of the claimants injuries and if those injuries were caused by the incident that gave rise to the claim. EXPLANATION: A "claimant" is a third-party who has submitted a claim against the insured's policy. The adjuster would perform a "claimant investigation" to determine the extent of the claimants injuries and if those injuries were caused by the incident that gave rise to the claim.
Under a Loss Sustained Commercial Crime form, coverage applies: While the policy is in force and for up to one year after the policy expires. While the policy is in force and for up to 60 days after the policy expires. Only while the policy is in force. While the policy is in force and for up to 90 days after the policy expires.
While the policy is in force and for up to one year after the policy expires. EXPLANATION: Coverage applies under the Loss Sustained form while the policy is in force and for up to one year after the policy expires, provided there is sufficient evidence to prove that the loss occurred during the policy period.
The limit of insurance for the standard Businessowners policy coverage extension for "Personal Property Off-Premises" that applies to "property in transit" is: $1,000. $2,500. $5,000. $10,000.
$10,000. EXPLANATION: The standard Businessowners policy provides a $10,000 limit for "property in transit" under the coverage extension known as "Personal Property Off-Premises".
The Commercial Building & Personal Property coverage form includes an Additional Coverage for property removed from the premises because of being endangered by an insured peril. The coverage applies for: 5 days after the property is first moved. 30 days after the property is first moved. 10 days after the property is first moved. 15 days after the property is first moved.
30 days after the property is first moved. EXPLANATION: Property removed is covered for up to 30 days after being removed to another location. Removed property is covered for any direct physical loss.
Under a Business Auto policy, which coverage symbol indicates that a car is subject to mandatory no-fault insurance as required by state law? 5 9 7 2
5 EXPLANATION: Symbol #5 of the Business Auto policy covers vehicles subject to their state no-fault insurance laws.
Under the New York Cybersecurity Regulation, each covered entity must maintain documentation supporting certification of compliance with the regulation for: 3 years. 1 year. 7 years. 5 years.
5 years. EXPLANATION: All documentation supporting this certification must be maintained for five years. Documentation of identification of needed material improvements/updates and any related remedial efforts must be maintained as well.
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. 10 days 14 days 30 days 60 days
60 days EXPLANATION: 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.
Billy has his commercial interests covered with a Commercial Package Policy. He would like to modify one of his coverage parts. This change will be made by: Adding an endorsement to the coverage part he would like to change. Adding an interline endorsement to the policy. Making a change to the declarations page of the policy. Making a change to the conditions section of the policy.
Adding an endorsement to the coverage part he would like to change. EXPLANATION: To make a change to one of the coverages in a Commercial Package Policy, a single endorsement would be added to that coverage part.
The "Sudden and Accidental Tearing Apart, Cracking, Burning or Bulging" broad form peril applies to all of the following, EXCEPT: Any structural wall of the covered dwelling or other structure. A dishwasher within the covered dwelling. The hot water heater in the covered dwelling. An automatic fire sprinkler system within the covered dwelling.
Any structural wall of the covered dwelling or other structure. EXPLANATION: The "Sudden and Accidental Tearing Apart, Cracking, Burning or Bulging" broad form peril does NOT apply to structural walls of the dwelling.
All of the following statements are TRUE regarding the general aggregate limit of a Commercial General Liability policy, EXCEPT: Applies to claims arising from the products-completed operations hazard. It is the most that will be paid for all claims under Coverages A, B and C during the policy period. It is an annual limit that is reinstated at the beginning of each new policy year. Once this limit has been exhausted, the insurer has no further obligation for additional claims made within the policy period.
Applies to claims arising from the products-completed operations hazard. EXPLANATION: The general aggregate limit in a CGL policy does not apply to products-completed operations hazards as this hazard has its own separate aggregate limit.
Which of the following tests is used to evaluate red and white blood cells as well as platelets to determine if the patient is suffering from anemia, an infection, or other diseases? Blood chemistry analysis. Complete blood count (CBC). Myelography. Arthroscopy.
Complete blood count (CBC). EXPLANATION: A complete blood count (CBC) evaluates the red blood cells, white blood cells and platelets to determine if a disease exists.
On a standard BOP policy, all of the following items have a limitation on the coverage amount if the cause of loss is theft, EXCEPT: Patterns. Furs. Jewelry. Computers.
Computers. EXPLANATION: Computers are not included in the list of property with a $2,500 limit of liability for theft.
Larry owns and runs a political website that posts stories that are favorable to one political party and unfavorable to the other parties. Larry has a message board feature where he encourages his visitors to post their own negative opinions about the parties in which they do not agree. Many of these posts have gone beyond opinion and have sunk to the level of slander and Larry is sued. Larry's Commercial General Liability insurer will: Cover the cost to defend Larry and pay any damages awarded by the court. Deny coverage for defense costs and damages awarded by a court because the policy specifically excludes coverage for this exposure. Deny coverage for damages awarded by a court, but will pay to defend Larry in court. Sue Larry for participating in activities that are specifically excluded by the policy.
Deny coverage for defense costs and damages awarded by a court because the policy specifically excludes coverage for this exposure. EXPLANATION: Coverage will be denied because this exact scenario is specifically excluded under Coverage B of the policy.
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 B of Gavin's policy? Gavin and Tabitha. Gavin, Tabitha, and Tabitha's friends. Gavin, Tabitha, Tabitha's friends, the driver and passengers in the other car. The driver and passengers in the other car.
Gavin, Tabitha, and Tabitha's friends. EXPLANATION: The injuries to Gavin, Tabitha and Tabitha's friends would be the only ones covered by Part B of the Personal Auto policy.
The coverage territory of the Business Auto form provides for "worldwide liability coverage" for private passenger autos that the insured: Hires, leases, rents or borrows without a driver while outside the United States, its territories and possessions. Purchases while outside the United States, its territories and possessions. Sells while outside the United States, its territories and possessions. Occupies while outside the United States, its territories and possessions.
Hires, leases, rents or borrows without a driver while outside the United States, its territories and possessions. EXPLANATION: World-wide liability coverage is provided for a period of 30 days for autos the insured hires, leases, rents or borrows without a driver. The insured's liability is determined in a settlement agreed to by the insurer, or in a suit filed in the United States or its territories, possessions, Puerto Rico or Canada.
What are the two main types of coverage usually found in an Aviation insurance policy? Hull coverage and Liability coverage. Hull coverage and Cargo Liability coverage. Admitted Aircraft Liability and Hull coverage. Passenger Bodily Injury and Bodily Injury Excluding Passengers.
Hull coverage and Liability coverage. EXPLANATION: Hull and Liability coverage are the two main types of Aviation insurance coverage.
Which of the following personal automobile endorsements is attached to provide automobile coverage for an insured who does not own an automobile but needs coverage when operating one? Named Non-Owner Coverage endorsement. Joint Ownership Coverage endorsement. Individual Named Insured endorsement. Additional Insured endorsement.
Named Non-Owner Coverage endorsement. The personal automobile endorsement that is attached to provide automobile coverage for an insured who does not own an automobile but needs coverage when operating one is the "Named Non-Owner Coverage" endorsement.
With regard to workers' compensation coverage, a "competitive" state is: One where both private and government insurers write workers' compensation policies, but the government premium rates remain the lowest and most competitive. One where the state government provides all workers' compensation policies, but there are enough different coverage choices within the program to be competitive. One where both private and government insurers write workers' compensation policies that compete against one another. One where the law requires a large enough number of workers' compensation carriers be granted a certificate of authority to write coverage so that it keeps the premium rates at a low, competitive rate.
One where both private and government insurers write workers' compensation policies that compete against one another.
Defense costs under a Personal Umbrella policy are: Paid in the amount scheduled in the policy Declarations. Paid by the insurer as a reduction of the policy limit. Paid by the insured. Paid by the insurer in addition to the policy limit.
Paid by the insurer in addition to the policy limit.
Which of the following statements is FALSE regarding Professional Liability policies? Professional Liability policies may contain a "consent to settle" provision. Professional Liability policies provide coverage for the acts or omissions, intentional or dishonest acts of the insured. Most Professional Liability policies provide coverage for economic and financial losses and provide coverage for bodily injury in only a few circumstances. Professional Liability policies reduce the policy limits to pay defense costs, they are not paid in addition to the policy limits.
Professional Liability policies provide coverage for the acts or omissions, intentional or dishonest acts of the insured. EXPLANATION: Professional Liability policies DO NOT provide coverage for intentional or dishonest acts of the insured. This is a basic exclusion of all insurance policies.
There are three criteria for a Business Income coverage to pay in case of a loss. Which of the following is NOT one of those criteria? The insured business must have experienced direct physical damage to property located on the insured premises. The direct physical loss suffered by the business must have been caused by a third party. The direct physical loss experienced by the insured business must have been caused by a covered cause of loss. The damage experienced by the insured must cause business operations to be suspended or to cease.
The direct physical loss suffered by the business must have been caused by a third party. EXPLANATION: The answer choice that is NOT a criteria for the Business Income coverage to pay on a loss is: "The direct physical loss suffered by the business must have been caused by a third party."
Carol is covered under a Commercial Property policy with an Earthquake & Volcanic Eruption -- Sprinkler Leakage Only Endorsement attached. Which of the following statements is correct regarding Carol's deductible under the endorsement? The flat dollar deductible for fire applies. A percentage deductible is indicated on the form. No deductible applies. The standard deductible on this endorsement is $500.
The flat dollar deductible for fire applies. EXPLANATION: When the endorsement indicates coverage for "Sprinkler Leakage Only", the flat dollar deductible for fire applies.
The form requesting a 1033 waiver that must be submitted to the New York Department for consideration includes all of the following information, EXCEPT: The employment history of the waiver applicant. The names of other individuals who participated in the felony along with the waiver applicant. The details of the felony conviction. Personal history details of the waiver applicant.
The names of other individuals who participated in the felony along with the waiver applicant. EXPLANATION: The names of other individuals who participated in the felony along with the applicant are not requested on the 1033 waiver form.
All of the following are reasons that an adjuster should keep very detailed log notes, EXCEPT: To assist in determining the negligent parties. To assist in determining if the claim is fraudulent. To produce notes that will support a fraudulent denial of claims. To be used in case of a future arbitration, mediation, or litigation proceeding.
To produce notes that will support a fraudulent denial of claims. EXPLANATION: The adjuster's log notes are used to determine negligent parties, to assist in detecting fraud, to become a part of the claims file, and to be used in future proceedings. The log notes are not intended to produce a fraudulent record to deny a claim.
Under Ben Green's personal auto policy, each of the following would qualify as a "family member" EXCEPT: Alice Green, Ben's sister, who lives in Ben's household. Susan Green, Ben's wife. Susan maintains a separate residence although she and Ben are not divorced. Ben Green, Jr., Ben's 16- year-old son, living with his father. Patty Green, Ben's 21-year-old daughter who maintains a residence with Ben while she is going to college in another state.
Susan Green, Ben's wife. Susan maintains a separate residence although she and Ben are not divorced. EXPLANATION: The question is asking which person is NOT a family member. Susan Green is no longer a member of the insured's residence and would not be covered. A spouse is considered to be a family member of the insured IF they live with the insured in the same household.
Vinnie's Vans, Inc. provides a van with a driver for groups to tour the city. Vinnie carries a Commercial Auto policy with a liability limit of $1 million per accident on his vans. Vinnie also carries a Commercial Umbrella policy with a per accident limit of $1 million and an aggregate limit of $2 million. Three of Vinnie's Vans are involved in three separate accidents on a snowy night. Each accident results in Vinnie being held liable for damages of $2 million, for a total of $6 million in claims. How will Vinnie's policies pay the claims? The Commercial Auto policy will pay $3 million and the Commercial Umbrella policy will pay $2 million. The Commercial Auto policy will pay $1 million and the Commercial Umbrella policy will pay $3 million. The Commercial Auto policy will pay $3 million and the Commercial Umbrella policy will pay $3 million.
The Commercial Auto policy will pay $3 million and the Commercial Umbrella policy will pay $3 million. EXPLANATION: The Commercial Auto policy will pay $3 million ($1 million per accident). The Commercial Umbrella policy pays the additional $1 million per accident for a total of $3 million. You might ask how this can be if the aggregate limit of the Commercial Umbrella policy is only $2 million. This is because the aggregate limit of the Umbrella policy does not apply to commercial automobile claims.
In New York, automobile insurers are required to offer supplementary uninsured motorists coverage (SUM) but are not required to provide more than a maximum limit of: $250,000 per person/$500,000 each accident. $100,000 per person/$300,000 each accident. $50,000 per person/$100,000 each accident. $200,000 per person/$500,000 each accident.
$250,000 per person/$500,000 each accident. EXPLANATION: The maximum limit is $250,000 per person and $500,000 for each accident.
Uninsured / Underinsured Motorist coverage in New York provides coverage for all of the following, EXCEPT: A minimum amount for the wrongful death of more than one person. A minimum amount for the wrongful death of one person. A minimum amount for bodily injury liability per person. A minimum amount for property damage liability occurring in one accident.
A minimum amount for property damage liability occurring in one accident. EXPLANATION: "A minimum amount for property damage liability occurring in one accident." is NOT TRUE. Property damage liability coverage is not included in UM / UIM coverage.
A business insured under a Commercial General Liability policy has a general aggregate limit of $1,000,000 and a "per occurrence" limit of $100,000. If an injured party is awarded $100,000 in damages for injuries arising out of premises hazards today, what will the company's general aggregate limit and "per occurrence" limit be tomorrow? General aggregate limit of $900,000; each occurrence limit of $100,000. General aggregate limit of $1,000,000; each occurrence limit of $100,000. General aggregate limit of $1,000,000; each occurrence limit of $0. General aggregate limit of $900,000; each occurrence limit of $0.
General aggregate limit of $900,000; each occurrence limit of $100,000. EXPLANATION: Amounts paid under the "per occurrence" (each occurrence) limit are subtracted from the general aggregate limit for all claims except those arising from the products and completed operations hazards. The remaining amount is the total amount available for the rest of the policy period for payment of covered claims.
Evan is the CEO of Worldwide Widgets and is also the named insured under the company's Commercial Crime policy with the Extortion Commercial Entities endorsement attached. Evan's son has been kidnapped and the criminals are threatening to kill him if Evan does not pay them 2 million dollars in unmarked bills within 12 hours. Evan loves his son and decides to pay the money immediately without reporting the kidnapping to law enforcement. Which of the following statements is TRUE regarding how Evan's loss will be paid? The claim will be paid for 1 million dollars as this is the limit imposed by the endorsement. The claim will be denied because the "Extortion - Commercial Entities" endorsement does not cover the surrendering of property for kidnapping. The claim will most likely be denied because Evan did not make a reasonable effort to report the extortion attempt to the authorities before surrendering the money.
The claim will most likely be denied because Evan did not make a reasonable effort to report the extortion attempt to the authorities before surrendering the money. EXPLANATION: The claim will most likely be denied because Evan did not make a "reasonable effort" to report the extortion attempt to the authorities before surrendering the money. The endorsement contains one exclusion requiring the named insured make a "reasonable effort" to report the demands to an associate or local law enforcement BEFORE surrendering the money to the extortionists.
Cassie is building a new dwelling and has purchased a Dwelling policy and attached the Dwelling Under Construction endorsement to it. The limit for the home when it is complete will be $175,000. When the dwelling is 15% complete, Cassie suffered a covered loss. How much of the total limit will be available to cover Cassie's loss? $17,500. $26,250. $35,000. $18,525.
$26,250. EXPLANATION: 15% of $175,000 is $26,250, which will be the available portion of the total limit that will be available for Cassie's loss.
The Homeowners policies allow for the attachment of the Personal Injury endorsement. Which of the following exposures would be covered under this endorsement? Injury suffered by a person who was assisting the insured in removing black mold from his premises. Slander committed by the insured, who is a drug dealer and makes false statements against another drug dealer. Bodily injury suffered by a third-party that was struck by the insured while driving his vehicle. An insured's oral statements to others that harmed the reputation of another person.
An insured's oral statements to others that harmed the reputation of another person. EXPLANATION: An insured's oral statements to others that harmed the reputation of another person would be covered under the Personal Injury endorsement. The other three situations listed are excluded.
Part F of the standard Personal Automobile policy states that the policy can be terminated within the first 60 days for any reason other than non-payment of premium if: At least 20-days' notice is provided to the insured. At least 30-days' notice is provided to the insured. At least 10-days' notice is provided to the insured. Another type of policy option is provided by the insurer.
At least 20-days' notice is provided to the insured. EXPLANATION: Within the first 60-days, a Personal Automobile policy can be cancelled for any reason other than non-payment of premium if a 20-day notice is provided to the insured.
Holden is a staff adjuster for Binders Keepers, Inc., an insurance company. He has been engaged in an investigation of a third-party claim against an insured. Holden has advised his principal, Binders Keepers, Inc. that while performing the investigation, he found that it is very likely that the insured was not negligent and probably would not be found liable for the claim if the third-party decided to bring a lawsuit. Holden: Is performing his fiduciary responsibilities to his principal by providing factual data gained through the claims investigation. Is engaging in quid pro quo. Has made a material misrepresentation. Is engaging in the unauthorized practice of law.
Is engaging in the unauthorized practice of law. EXPLANATION: Holden is engaged in the unauthorized practice of law by providing an opinion that the insured would likely not be found liable for the claim. Holden would be permitted to show the company the factual data of the claim and allow the counsel (attorney) for the company to formulate an opinion as to the liability of the insured.
A disadvantage to using the "formula method" to set claim reserves is: It is very time consuming. It does not take into consideration the specific circumstances of a claim. It allows adjusters to make subjective decisions. The varied experience of the adjusters involved can result in indecisiveness and a delay in payment of the claim.
It does not take into consideration the specific circumstances of a claim. EXPLANATION: The disadvantage of the "formula method" that was listed as an answer choice is: "It does not take into consideration the specific circumstances of a claim." The other answer choices are disadvantages of other reserving techniques.
Which of the following types of bonds guarantees that all project materials will be paid in full by the contractor upon completion of the project? Performance bond. Maintenance bond. Bid bond. Payment bond.
Payment bond. EXPLANATION: A payment bond guarantees that all project materials will be paid in full by the contractor upon completion of the project?
Willie's Widgets carries two separate policies to provide Employers Liability coverage. When Willie's is sued by an employee for an injury not covered by state workers' compensation statutes, how will the claim be settled? By using the contribution by equal shares method. By using the pro rata share method. By having the policy that was purchased first pay up to its limit and the second policy that was purchased later pay any remaining balance. By having the primary policy pay first and the excess policy pay only after the primary policy's limit of liability is reached.
By using the contribution by equal shares method. EXPLANATION: The Employers Liability coverage specifies that claims are settled using the "contribution by equal shares" method. To review how this method works, go back to Insurance Fundamentals -- Module C.
The insured awoke and found that a water line on his side of the water meter has broken. Several thousand gallons of water have escaped. The water company bills the insured for the loss of the water, because the breakage in the waterline occurred on his side of the water meter. The insurance company will: Deny the claim because water is excluded under Coverage C. Pay for the loss of the water under Coverage C. Pay for the loss of the water under Coverage B. Deny the claim because flood is never covered under a Homeowners form.
Deny the claim because water is excluded under Coverage C. EXPLANATION: The insurer will deny the claim because "water" is specifically excluded as personal property under Coverage C of the Homeowners policies.
In New York, the Superintendent may revoke an adjuster's license for which of the following? Denying claims that are outside the policy coverage. Having been convicted of a felony. Failing to report a change of address. Having been convicted of a misdemeanor.
Having been convicted of a felony. EXPLANATION: A requirement for licensing is that the applicant must not have been convicted of a felony. If the adjuster commits a felony after he/she has already been licensed, the license will be revoked because the adjuster has "ceased to meet the requirements for licensure".
Liability policies require that the defendant's breach of their legal duty was the actual cause of the loss that was the basis for a third party lawsuit. Any of the following terms may be used to refer to the "actual cause of the loss", EXCEPT: Proximate cause. Factual cause. Intervening cause. Legal cause.
Intervening cause. EXPLANATION: The "actual cause of the loss" cannot be referred to as "intervening cause" which is actually an event that interrupts the events that are the actual cause of the loss.
When the New York Department receives a complaint against a licensee from a consumer, the Superintendent may undertake all of the following, EXCEPT: Referring matters of federal law to the appropriate agency. Provide assistance in mediating a resolution to the complaint. Referring criminal matters to the state Attorney General when necessary to protect the consumer. Ordering criminal penalties to any one found to have violated the New York insurance code.
Ordering criminal penalties to any one found to have violated the New York insurance code. EXPLANATION: The Superintendent cannot order criminal penalties, the penalties ordered by the Superintendent are administrative penalties.
The insuring agreement of a Personal Umbrella policy provides coverage for all of the following, EXCEPT: Personal injury damages for which the insured is legally liable for personal injury in excess of the retained limit. Damages for which the insured is legally liable for bodily injury and property damage in excess of the retained limit. Postjudgment interest that accrues after the entry of a judgment. Defense costs in addition to the policy limits.
Postjudgment interest that accrues after the entry of a judgment.
Which of the following is NOT one of the four major coverages of an Ocean Marine policy? Hull coverage. Freight insurance. Seaworthiness. Protection & Indemnity.
Seaworthiness. EXPLANATION: Seaworthiness is an implied warranty, not a major coverage.
Which of the following statements is NOT TRUE regarding a situation where an insured covered by a New York automobile policy is involved in an auto accident and is provided with health services in a state other than New York? The New York insurer will pay the bill for the necessary health services provided to the insured in another state regardless of the amount. The New York insurer will pay the provider of health services no more than the maximum amount permitted by the state in which the provider practices. The New York insurer will pay the provider of health services no more than the maximum amount legally payable for that service within the state of New York. The New York insurer will pay the provider of health services an amount dictated by the parameters of the New York Insurance code.
The New York insurer will pay the bill for the necessary health services provided to the insured in another state regardless of the amount. EXPLANATION: The answer choice that is NOT TRUE is: "The New York insurer will pay the bill for the necessary health services provided to the insured in another state regardless of the amount." There are parameters set by law that determine how much the New York insurer will pay for health services.
The New York Personal Automobile mandatory Amendment of Policy Provisions endorsement amends the standardized collision and comprehensive coverage on a newly acquired vehicle if all of the following apply, EXCEPT: The newly acquired auto replaces a vehicle that is shown on the Declarations page of the policy. The insured pays a "newly acquired auto" premium within 30 days of purchasing the new vehicle. The insured paid premiums on the vehicle that was replaced for at least 12 months before the insurer is expect to cover the newly acquired vehicle. The insured requests coverage on the newly acquired vehicle within 3 days of its acquisition.
The insured pays a "newly acquired auto" premium within 30 days of purchasing the new vehicle. EXPLANATION: The insured DOES NOT have to pay a "newly acquired auto" premium within 30 days of purchasing the new vehicle. The other three answer choices ARE required for coverage on a newly acquired auto to apply.
An automobile insurer in New York wishes to nonrenew an auto policy. Which of the following best describes the statutory requirements for the notice of nonrenewal? The insurer must send written notice of the nonrenewal at least 20 days in advance of the expiration date of the policy. The insurer must send written notice of the nonrenewal at least 60 days, but not more than 100 days, in advance of the expiration date of the policy. The insurer must send written notice of the nonrenewal at least 60 days in advance of the expiration date of the policy. The insurer must send written notice of the nonrenewal at least 45 days, but not more than 60 days, in advance of the expiration date of the policy.
The insurer must send written notice of the nonrenewal at least 45 days, but not more than 60 days, in advance of the expiration date of the policy. EXPLANATION: Auto insurers in New York who wish to nonrenew an auto policy, must do so at the expiration date of the policy. The insurer must send written notice of the nonrenewal at least 45 days, but not more than 60 days, in advance of the expiration date of the policy.
An insured has her dwelling covered by an HO-3 form, with a $500,000 limit of liability for Coverage A. A fire breaks out and the dwelling is a total loss. The entire $500,000 limit is used to cover the direct physical damage to the dwelling. However, there is a large amount of debris from the burned structure covering the insured's property that will need to be removed. In this situation, how will the cost of the debris removal be paid? 5% of the Coverage A limit is set aside to cover debris removal. This means that the insured must pay $25,000 out-of-pocket to cover the direct physical damage to the dwelling itself. When the entire Coverage A limit is used to cover the direct physical damage to the dwelling, an additional 5% of the Coverage A limit will be added to cover debris removal. The policy will only pay its Coverage A limit and the insured must pay for the debris removal out-of-pocket.
When the entire Coverage A limit is used to cover the direct physical damage to the dwelling, an additional 5% of the Coverage A limit will be added to cover debris removal. EXPLANATION: Coverage for debris removal is included in the Coverage A limit of liability, it is not an additional amount of insurance, except if the entire Coverage A limit is used to cover the damage or destruction to the dwelling. In that case, there is an additional amount of insurance that will be added for debris removal. This additional amount is 5% of the Coverage A limit.
All of the following actions must be taken before a claim settlement will be considered "executed", EXCEPT: When the insurer has approved the adjuster's final report. When the settlement documents have been signed by the insurer. When the settlement documents have been signed by the insured or claimant. When the claim has been paid in full.
When the insurer has approved the adjuster's final report. EXPLANATION: A claim settlement is considered to be "executed" when the insurer and the insured/claimant have signed the settlement documents and the claim has been paid in full at the agreed amount. The insurer does not have to approve the adjuster's final report before the claim is considered to be executed.
