AIC 31
Insurer A and B agree to the Property Subrogation Arbitration Rules and Agreement. As signatory companies both insurers are bound to forego litigation and submit to arbitration. The dispute under arbitration is a property damage claim. Under the Property Subrogation Arbitration Rules and Agreement, a property damage claim cannot be in excess of Select one: A. $ 100,000. B. $ 300,000. C. $ 500,000. D. $1,000,000.
A. $ 100,000.
Many law firms specialize in subrogation and typically handle cases on Select one: A. A contingent fee basis. B. A sliding fee scale. C. An hourly fee basis. D. A flat fee basis.
A. A contingent fee basis.
Almost all of the insured's duties in the event of loss, as described in the property coverage forms, are designed to Select one: A. Aid in the adjuster's investigation. B. Benefit the named insured. C. Prevent litigation by the insured against the insurer. D. Meet state compliance requirements.
A. Aid in the adjuster's investigation.
Which of the following statements is true regarding floor plans and diagrams used in the loss adjustment process? Select one: A. Diagrams allow the adjuster to calculate repair costs and inform the insurance company of the extent of loss. B. Floor plans are essential for all losses regardless of the size of the loss. C. The adjuster typically starts by measuring and diagramming the entire interior perimeter. D. Floor plans and diagrams provide a thorough inventory of the damaged property.
A. Diagrams allow the adjuster to calculate repair costs and inform the insurance company of the extent of loss.
The appraisal provision is used in Select one: A. Most property policies. B. All insurance policies. C. All liability insurance policies. D. Some life insurance policies.
A. Most property policies.
When making any payment, the adjuster Select one: A. Must be aware of parties named in the policy as well as parties not named in the policy who may have an interest in the claim payment. B. Must include only the named insured because of the contractual relationship. C. May choose to include the mortgagee, but only if the mortgagee is named in the policy. D. Need not include anyone to whom the insured has assigned the policy proceeds because this violates the policy conditions.
A. Must be aware of parties named in the policy as well as parties not named in the policy who may have an interest in the claim payment.
Public adjusters can help insureds by Select one: A. Presenting claims in an organized manner. B. Representing the insured in legal proceedings. C. Preventing waiver and estoppel. D. Eliminating the insured's need to comply with policy conditions.
A. Presenting claims in an organized manner.
Fred ran a red light and injured Jane and damaged her vehicle. Jane's vehicle damage and medical bills amounted to $2,500. Fred was insured under a personal auto policy and his car was a $15,000 total loss. Jane's insurer is subrogating against Fred's insurer. There is a $500 deductible on Jane's policy. The amount Jane's insurer will most likely seek recovery for is Select one: A. $ 2,000. B. $ 2,500. C. $15,000. D. $17,000.
B. $ 2,500.
Which one of the following perils was added by the Broad Form endorsement? Select one: A. Vehicles B. Falling objects C. Windstorm D. Riot or civil commotion
B. Falling objects
Which one of the following statements is correct with respect to the Guiding Principles? Select one: A. They assist insurers to develop clear and specific other-insurance provisions. B. They apply when other-insurance provisions are contradictory or do not exist. C. They were first developed by the National Underwriter Company. D. They negate the effect of escape clauses in other-insurance conflict situations.
B. They apply when other-insurance provisions are contradictory or do not exist.
Collapse as an additional coverage under the HO-3 is an example of Select one: A. An increase in the available limit. B. A coverage that applies only in the event of volcanic action. C. A reinstatement of coverage previously excluded. D. An indirect, nonphysical loss that would not be otherwise covered.
C. A reinstatement of coverage previously excluded.
Jan is a property loss claim adjuster handling a recent fire loss at a drug store. Some merchandise was destroyed, and some might still be salable in certain discount markets. She should consider using Select one: A. A restoration specialist. B. An engineer. C. A salvor. D. An appraiser.
C. A salvor.
A denial letter must Select one: A. Include copies of all statements and examinations under oath. B. Refer to the proof of loss provided by the insured. C. State all the known reasons for the denial. D. Be signed by the attorney who drafts it.
C. State all the known reasons for the denial.
The amount of money the insured can expect in settling certain claims is sometimes dictated in various states by Select one: A. Fraud legislation. B. Current economic conditions within the state. C. State-specific valued policy laws. D. The broad evidence rule.
C. State-specific valued policy laws.
In determining coverage for a loss under a special-form policy, the adjuster must determine Select one: A. Whether any of the listed perils caused the loss. B. The source of an intervening agency, instrumentality, or influence. C. Whether any exclusions apply. D. What kind of nonphysical loss occurred, if any.
C. Whether any exclusions apply.
Often an adjuster submits a claim to the insurer with a statement of loss. This statement indicates the value of the property, the amount of loss to the property, and the Select one: A. Amount to be subrogated under the policy. B. Policy endorsements. C. Policy exclusions. D. Amount claimed under the policy.
D. Amount claimed under the policy.
Which one of the following describes the mortgage clause? Select one: A. A mortgagee is not entitled to make a claim if the insured's claim is denied. B. The clause is only included in all personal insurance policies. C. The clause gives the mortgagee only rights independent of named insured. D. The mortgagee is notified of cancellation or non-renewal at least 10 days before cancellation or non-renewal takes effect.
D. The mortgagee is notified of cancellation or non-renewal at least 10 days before cancellation or non-renewal takes effect.
A scope for a building loss includes which one of the following? Select one: A. A description of the proposed type of repairs B. An estimated cost of repairs C. Pictures of the damaged property D. A list of areas undamaged
A. A description of the proposed type of repairs
As a result of a fire loss to Jerry's property, Insurer X has invoked the proof of loss requirement and Jerry has filed the proof of loss. The insurer must, within a designated time period, make a decision. It can choose to reject the proof of loss and give Jerry an opportunity to refile a corrected proof of loss. Or, the insurer could reject Jerry's proof of loss and allow him to make the next move. One other option the insurer could exercise would be to Select one: A. Accept the proof of loss as submitted. B. Amend the proof of loss with additional policy conditions. C. Waive its right to the proof of loss from Jerry and proceed with the claim process. D. Attach an endorsement to the proof of loss.
A. Accept the proof of loss as submitted.
Alvin Ross has been informed by his insurance agent that his policy protects against risk of direct physical loss to property. Over time, the walls began to crack and pipes began to break causing extensive damage. Alvin was told that these problems are due to faulty design. Which one of the following statements is true? Select one: A. Alvin's insurer has the burden of proof, and if the insurer cannot prove that an exclusion applies based on what caused the loss, then coverage would apply. B. Alvin's agent has the burden of proof to show that any cause of loss is covered under Alvin's policy which protects against risk of direct physical loss to property. C. The burden of proof is on the builder to show that defective design would be a covered loss under a policy which protects against risk of direct physical loss to property. D. The burden of proof is on Alvin to show that fault of the builder is a covered peril.
A. Alvin's insurer has the burden of proof, and if the insurer cannot prove that an exclusion applies based on what caused the loss, then coverage would apply.
Which one of the following statements is true regarding a specified-perils coverage loss? Select one: A. An adjuster must verify an identified peril caused the loss before paying the loss. B. Coverage is broader than under special-form policies. C. Specified-perils policies generally have many more exclusions than do special-form policies. D. Any loss is covered if it is not excluded.
A. An adjuster must verify an identified peril caused the loss before paying the loss.
Barbara's basket shop is insured under a property insurance policy. Her basket inventory costs her $5,000. After business markup, the inventory is worth $10,000. She wants to include the business markup as well as the cost of the baskets in her insurance coverage. Barbara needs Select one: A. An endorsement to cover for the selling price of the inventory. B. A stated value policy. C. A warranty service to guarantee full replacement value. D. A floater policy with scheduled coverage for her basket inventory.
A. An endorsement to cover for the selling price of the inventory.
Homeowner Jack has become extremely concerned about the possibility of a sinkhole collapse. Assuming Jack cannot obtain direct physical loss coverage for this potential peril, which one of the following types of coverage is most appropriate for him? Select one: A. Broad-form coverage B. Fire policy unendorsed C. Extended coverage D. Basic homeowner policy unendorsed
A. Broad-form coverage
Henry's home was badly damaged from weight of ice and snow on the roof and eaves. The property insurance coverage that would cover his loss is Select one: A. Broad-form coverage. B. Fire policy unendorsed. C. Extended coverage. D. Basic-form coverage.
A. Broad-form coverage.
An instrument for payment of a claim that must be verified by the issuing entity before funds are disbursed is a Select one: A. Draft. B. Transfer. C. Advance payment receipt. D. Check.
A. Draft.
When the insured has a specified-perils policy, the Select one: A. Insured is obligated to determine which peril applies to the damage to his or her property. B. Insured must seek a determination from outside appraisers regarding the cause of loss. C. Insurer can delegate the burden of proof to the insured. D. Insurer has the burden of proving that the loss is covered.
A. Insured is obligated to determine which peril applies to the damage to his or her property.
Which one of the following statements is true regarding the role of the public adjuster? Select one: A. Public adjusters may obtain business by monitoring police and fire calls and appearing on the scene immediately after a loss. B. Public adjusters have a contractual obligation to appear at examinations under oath when claims are litigated. C. Public adjusters handle claims differently than an insurer-employed adjuster who deals directly with the insured. D. Public adjusters may not submit bids to contractors who routinely work with them.
A. Public adjusters may obtain business by monitoring police and fire calls and appearing on the scene immediately after a loss.
Additional coverages are distinguished from the rest of the policy because Select one: A. Some additional coverages increase the available limit. B. The burden of proof rests with the insured for additional coverages under special-form policies. C. Policy conditions do not apply to additional coverages. D. Additional coverages restrict the definition of covered perils.
A. Some additional coverages increase the available limit.
Which one of the following statements is true regarding special-form coverage? Select one: A. Special-form policies cover any loss unless the loss is specifically excluded or is limited by the policy. B. Special-form policies generally have fewer exclusions than specified-perils policies. C. The special-form coverage is offered on a named perils basis only. D. The burden of proof is on the insured with a special-form policy.
A. Special-form policies cover any loss unless the loss is specifically excluded or is limited by the policy.
Brenda owns a rare piece of art appraised by an antiquities dealer. Brenda wants to make sure that she purchases an insurance policy that will pay her for the proper amount in the event of a loss. The property policy that Brenda purchases should contain which one of the following settlement options? Select one: A. Stated or agreed value B. Repair or replace C. Selling price D. Original cost
A. Stated or agreed value
After consulting Paul, the underwriter, claim adjuster Teena has met with Eloise, her claim supervisor, and they have decided to deny a large liability claim. Teena has asked an attorney to draft the denial letter which will be sent to the insured by certified mail. The denial letter should be signed by Select one: A. Teena, the claim adjuster. B. The attorney. C. Eloise, the claim supervisor. D. Paul, the underwriter.
A. Teena, the claim adjuster.
Which one of the following statements is true regarding the Guiding Principles? Select one: A. The Guiding Principles can provide a method of proration for policies that are neither primary nor excess to one another. B. The Guiding Principles should apply when other insurance conditions are clear. C. State insurance commissioners mandate insurer compliance with the Guiding Principles to ensure fair claim practices. D. The Guiding Principles proation must depend on the limits of insurance when policies have the same priority level.
A. The Guiding Principles can provide a method of proration for policies that are neither primary nor excess to one another.
An essential distinction between a specified-perils policy and a special-form policy is Select one: A. The insured has the burden of proof for specified-perils policies and the insurer has the burden of proof for special-form policies. B. A mortgagee has fewer rights under a specified-perils policy than under a special-form policy. C. Additional coverages vary significantly between the two policy forms. D. Improvements and betterments are covered under specified-perils policies but not under special-form policies.
A. The insured has the burden of proof for specified-perils policies and the insurer has the burden of proof for special-form policies.
Joe Alexander insured his antique carriage under a policy with a stated or agreed value. The garage in which he stored his carriage burned to the ground, resulting in a total loss to the carriage. Joe's insurer will pay Select one: A. The stated or agreed value in the policy. B. The replacement cost of the carriage. C. The original cost of the carriage. D. The actual cash value of the carriage.
A. The stated or agreed value in the policy.
Improvements and betterments are changes made in a leased structure. These changes are generally made by Select one: A. The tenant to suit the tenant's purposes. B. The landlord to comply with the insurer's requirements. C. The tenant as a result of the landlord's or insurer's requirements. D. The landlord to suit the landlord's purposes.
A. The tenant to suit the tenant's purposes.
The purpose of the appraisal clause is Select one: A. To resolve differences over the value of a loss. B. To prevent a claim from escalating into a lawsuit. C. To settle legal disputes. D. To determine the actual value of a loss.
A. To resolve differences over the value of a loss.
Which one of the following involves voluntarily and intentionally relinquishing a known contractual right? Select one: A. Waiver B. Estoppel C. Surrender D. Subrogation
A. Waiver
Phyllis is an expert consulted by ABC Insurer to establish facts that would show whether ABC Insurer has the right to seek reimbursement from Tom who caused an accident with property damage and medical bills for one of ABC's insureds. Tom was driving while impaired. Phyllis is involved in Select one: A. An insurance appraisal case. B. A subrogation case. C. A salvage case. D. An insurance fraud case.
B. A subrogation case.
Insurer RST is involved in a claim dispute with insured Alex regarding the coverage of his piano ruined in a water damage loss. RST has called in an appraiser to evaluate the piano but has been unable to reach an agreement. Because there is doubt and ambiguity about the coverage, the benefit of the doubt is likely to go to Select one: A. Neither Alex or RST because an umpire in the appraisal process will make the decision that binds all parties. B. Alex the insured. C. RST the insurer. D. Neither Alex nor RST since the claim is likely to be subrogated.
B. Alex the insured.
Upon receiving the authority to deny a claim involving the destruction of valuable art pieces, property loss adjuster Hal must ensure that the denial letter is prepared on a timely basis. In order to comply with his jurisdiction's legal requirements, Hal might want to use the service of Select one: A. A restoration specialist. B. An attorney. C. The state insurance department. D. An appraiser.
B. An attorney.
In the loss adjustment process, the purpose of a status report is to keep the insurer advised of the status of Select one: A. Attorney involvement and litigation progress. B. An investigation or adjustment. C. Any known contract violations or breaches. D. Negotiations regarding loss settlement amounts.
B. An investigation or adjustment.
Insurers include coinsurance clauses in their policies to Select one: A. Obtain the maximum amount of premium. B. Encourage insureds to carry adequate insurance. C. Discourage fraudulent loss reporting or activity. D. Provide for a higher deductible in the form of sharing in the loss.
B. Encourage insureds to carry adequate insurance.
Which one of the following types of coverage is an additional coverage? Select one: A. Falling objects B. Fire department service charges C. Volcanic action D. Glass breakage
B. Fire department service charges
Some additional coverages such as debris removal under the HO-3 Select one: A. Provide specialized coverages such as earthquake and flood. B. Increase the available limit. C. Expand definitions in the existing policy. D. Decrease the available limit.
B. Increase the available limit.
A mortgagee's rights under a property insurance policy can best be described as Select one: A. The same as a lienholder's rights. B. Independent of the named insured's rights and duties. C. The same as the insured's rights. D. More restrictive than the named insured's rights.
B. Independent of the named insured's rights and duties.
In some states or jurisdictions, obtaining a statement might waive the Select one: A. Insured's right to request alternative dispute resolution. B. Insurer's right to an examination of the insured under oath. C. Insurer's right to pursue subrogation of the claim. D. Insured's right to legal counsel.
B. Insurer's right to an examination of the insured under oath.
Which one of the following statements is true regarding collapse coverage? Select one: A. The part of a building left standing after another part has collapsed is part of the collapse loss. B. Insurers agree to pay for collapse of the insured building caused by perils listed in the form. C. Older forms did not include collapse as an insured peril. D. Current personal and commercial insurance forms do not include collapse as an additional coverage.
B. Insurers agree to pay for collapse of the insured building caused by perils listed in the form.
Janine purchased a house to be co-owned by her and her daughter, Patsy, for the two of them to reside in. If Patsy applies for their homeowners insurance, the insurance agent should Select one: A. Name Patsy as the named insured. B. List Patsy and Janine as named insureds. C. Name either Pasty or Janine as named insured. D. Name Janine as the named insured.
B. List Patsy and Janine as named insureds.
Natalie filed an insurance claim after her home was burglarized. She estimated the value of each item of her property but did not furnish receipts or descriptions. Natalie was careful to fully complete the proof of loss form and hand-carried it to her insurance producer only to have the insurer reject the proof of loss. Which one of the following is the most likely reason the insurer rejected Natalie's proof of loss? Select one: A. Natalie's proof of loss was incomplete on its face. B. Natalie did not have the proof of loss certified or notarized as to its authenticity. C. Natalie's proof of loss did not contain sufficient documentation to support her claim. D. The proof of loss must be mailed and date stamped to fulfill the proof of loss time limit requirement.
B. Natalie did not have the proof of loss certified or notarized as to its authenticity.
The problem of overlapping coverages is most likely to occur with Select one: A. Land. B. Personal property. C. Fixtures. D. Real property.
B. Personal property.
Which one of the following is true about specified-perils policies? Select one: A. Has many more exclusions than special-form coverage. B. Provides coverage on specified peril basis C. Provides all risk coverage D. Puts burden of proof on insurer
B. Provides coverage on specified peril basis
Freelance writer John owns a barn containing wheelbarrows, ladders, roofing shingles, a lawn mower, clothes, some copyrights, two vehicles, and some miscellaneous personal property. Which one of the following property items would be considered John's real property? Select one: A. Lawn mower B. Roofing shingles C. Furniture D. Copyrights
B. Roofing shingles
In the late 1930s and early 1940s, the Extended Coverage endorsement was developed. The endorsement added how many additional perils to the two perils already covered under the standard fire policy? Select one: A. Three B. Seven C. Eight D. Five
B. Seven It added the seven perils of explosion, windstorm, hail, smoke, vehicles, aircraft, and riot or civil commotion to the perils of fire and lightning.
When there is a total loss of insured property, state-specific valued policy laws require an insurer to pay Select one: A. Only the actual cash value of destroyed property covered under the insurance policy. B. The face amount of the policy at the time of the loss. C. The depreciated value of the property. D. The full replacement cost of the property not to exceed current market value.
B. The face amount of the policy at the time of the loss.
Martin, an adjuster, paid a large structural loss without checking to see whether any tax liens were on the property. Which one of the following is likely to occur if a tax lien exists? Select one: A. The tax lien will be forgiven by the government because of the extent of the loss. B. The insurer may be forced to pay the tax lien in addition to the loss. C. The mortgagee will pay the tax lien out of escrow accounts for the insured. D. The insured will be forced to pay the tax lien out of the insurance proceeds.
B. The insurer may be forced to pay the tax lien in addition to the loss.
Adjuster Nathan Smith suspects that a homeowner has presented a fraudulent claim for theft of camera equipment. Since Nathan nor the SIU can prove fraud, Nathan can limit the insurer's exposure on the loss by Select one: A. The broad evidence rule. B. The repair or replace option. C. Coinsurance provisions. D. Valued policy laws.
B. The repair or replace option.
Which one of the following statements is true regarding the insurance definition of fire? Select one: A. Intense heat which causes damage is considered "fire." B. There is no "fire" for insurance purposes without flame. C. Fire is the gradual oxidation of combustible material releasing heat and smoke. D. Fire is a chemical reaction which releases heat.
B. There is no "fire" for insurance purposes without flame.
Sam is an adjuster working a small claim that he feels can be handled over the telephone. The policy requires a proof of loss, but since the insured seems credible, Sam tells the insured that there is no need to produce a proof of loss. Sam's actions are considered Select one: A. A reservation of rights. B. An estoppel. C. A waiver. D. A proof of loss rejection.
C. A waiver.
Which one of the following types of lightning loss is the most difficult for an adjuster to handle? Select one: A. Direct lightning strike with breakage or shattering of window glass not contiguous with the strike B. Lightning damage to a roof detected only after a subsequent problem occurs C. Alleged ground surge damage to the wiring of a house D. Lightning damage caused by a fire to a building constructed with fire resistant materials
C. Alleged ground surge damage to the wiring of a house The resultant damage from such a ground surge is difficult to prove as nonfunctioning electrical equipment may be the only evidence of a lightning strike.
Which one of the following is the first activity undertaken by insurance claim department personnel when a claim is received? Select one: A. The insured is contacted B. An investigation is initiated C. An adjuster is assigned D. The claimant is contacted
C. An adjuster is assigned
The insurance industry's position concerning concurrent causation is that a loss is excluded if caused by Select one: A. A covered cause, but only if that cause is subordinate to the excluded cause. B. An excluded cause, but only if that cause is the primary cause of loss. C. An excluded cause whether or not the excluded cause is the predominant one. D. A covered cause in conjunction with a dominant covered peril.
C. An excluded cause whether or not the excluded cause is the predominant one.
Lifelong friends Sam and Peter combine their funds and purchase a summer home on a lake. As co-owners, each of them has a 50 percent interest in the property. Sam and Peter Select one: A. Are business partners. B. Are joint tenants. C. Are tenants in common. D. Are life tenants.
C. Are tenants in common
The distinction between real and personal property is important to insurance adjusters because Select one: A. Policy definitions apply differently for each. B. Concurrent causation affects only personal property losses. C. Different valuation methods are involved. D. The burden of proof differs for losses to each.
C. Different valuation methods are involved.
The earliest types of insurance coverage addressed only the building structures exposure and the peril of Select one: A. Removal. B. Theft. C. Fire. D. Lightning.
C. Fire.
A mortgagee's rights under a property insurance policy can best be described as Select one: A. The same as the insured's rights. B. The same as a lienholder's rights. C. Independent of the named insured's rights and duties. D. More restrictive than the named insured's rights.
C. Independent of the named insured's rights and duties
Which one of the following statements is true regarding the rights of those with insurable interests? Select one: A. Insureds and mortgagees have the same rights under insurance policies. B. Special lienholder clauses in policies specify the protection afforded to lienholders. C. Insurance policies normally protect the rights of those with insurable interests by listing them as named insureds, mortgagees, or loss payees. D. Lienholders and assignees have the same protection as mortgagees.
C. Insurance policies normally protect the rights of those with insurable interests by listing them as named insureds, mortgagees, or loss payees.
Public adjusters are paid by Select one: A. Insurers who deal with them on claims. B. State insurance departments which monitor company claim adjusters' performance. C. Insureds who retain their services and share a percentage of the claim settlement. D. Attorneys who represent insureds on difficult claims.
C. Insureds who retain their services and share a percentage of the claim settlement.
Lisa is covered under a specified-perils policy. She has called her insurance producer to report the theft of her wedding ring from her home. The burden of proof in this situation is on Select one: A. The claim representative. B. The insurer. C. Lisa. D. The insurance producer.
C. Lisa. When an insured is covered under a specified-perils policy, the insured, (Lisa) has the burden of proof and is obligated to determine which perils applies to the damage to the property (theft).
Which one of the following statements is true about entities with an insurable interest? Select one: A. Loss payees have rights under insurance policies separate from the rights of the named insured. B. Assignees have the same protection as mortgagees under an insurance policy. C. Mortgagees have rights under insurance policies separate from the rights of the named insured. D. Lienholders have the same protection as mortgagees under an insurance policy.
C. Mortgagees have rights under insurance policies separate from the rights of the named insured.
Which one of the following statements is true regarding the appraisal process in an insurance dispute resolution? Select one: A. The appraisal provision is used more often than any other policy condition. B. The final consideration in the appraisal is related to policy language interpretation. C. Once an appraisal is set, it is binding on all parties. D. If the insurer denies coverage, the insurer is deemed to have invoked the appraisal right.
C. Once an appraisal is set, it is binding on all parties.
In the event that insurance companies disagree about their obligations for payment when overlapping coverage exists, which one of the following procedures can be used to resolve these differences? Select one: A. Application of Intercompany Principles B. Proof of loss C. Resolution in court D. Subrogation
C. Resolution in court
Before inspecting a loss, a claim adjuster should do which of the following? Select one: A. Send a reservation of rights letter B. Document the claim file C. Review the coverage D. Select a disinterested appraiser
C. Review the coverage
Among the additional perils included in the Extended Coverage endorsement to property insurance policies is Select one: A. Collapse of buildings. B. Lightning. C. Smoke. D. Volcanic action.
C. Smoke.
Which one of the following is true regarding "additional coverage" Select one: A. Additional coverages are extensions of the same basic coverages in the policy but have additional features that allow more comprehensive property coverage. B. Additional coverage broadens the scope of coverage but does not increase the available coverage limit. C. Some additional coverages are created to reinstate coverage that has otherwise been eliminated by exclusions. D. Certain additional coverages are the same as main coverages, just with higher limits.
C. Some additional coverages are created to reinstate coverage that has otherwise been eliminated by exclusions.
In a recent property claim, insured Kate asserts that her current inventory values should include allowances for factors other than the replacement cost and depreciation. She insists that her personal property should reflect increased values because many of her home furnishings are antiques that are no longer obtainable in the current market. In valuing Kate's property, which one of the following valuation methods would be most appropriate? Select one: A. Valued policy regulation B. Current case law C. The broad evidence rule D. Modified market valuation
C. The broad evidence rule The broad evidence rule is a court ruling explicitly requiring that all relevant factors be considered in determining actual cash value. These factors include but are not limited to replacement cost, economic, technological or fashion obsolescence, use of the property income that might be derived from property, and other related factors.
Which one of the following statements is correct with respect to the Guiding Principles? Select one: A. They are relatively simple and easy to apply and insurers rarely disagree with the outcome resulting from applying them. B. Adherence to them is obligatory and the outcome of applying them is binding on all the insurers involved. C. They provide a method for proration for policies that are neither primary nor excess to one another. D. In establishing priority, they make more general policies primary over policies that describe the property more specifically.
C. They provide a method for proration for policies that are neither primary nor excess to one another.
The insurable interest requirement in property policies is Select one: A. To reimburse the proper people for the proper amount. B. To ensure equitable distribution of premium dollars. C. To prevent wagering on losses. D. To deter people from filing exorbitant claims.
C. To prevent wagering on losses.
Which one of the following statements is true regarding state-specific valued policies? Select one: A. Fraud is not a concern since the value of the property is limited to what is stated in the policy. B. Under valued policy laws it is better for an insurer to overinsure the property to allow for inflationary factors. C. Valued policy laws violate the principle of indemnity whenever the coverage exceeds the insured's property's value. D. Insureds cannot emerge after a loss in better financial condition than they were in before the loss.
C. Valued policy laws violate the principle of indemnity whenever the coverage exceeds the insured's property's value.
Vanessa Reddy is a homeowner who writes novels as a hobby. Her country home is situated on five acres of land and she has a swimming pool, two detached sheds, lawn machinery, furniture, and various personal effects. Which one of the following types of Vanessa's property would be considered personal property? Select one: A. The swimming pool B. The two detached sheds C. Vanessa's furniture D. The five acres owned by Vanessa
C. Vanessa's furniture
An insurer is most likely to elect to replace lost or damaged property through a replacement service company Select one: A. When the insurer has no standing arrangements for this sort of transaction. B. When the type of loss for the property is infrequent. C. When the markup on an item is especially high. D. When the item is still under warranty.
C. When the markup on an item is especially high.
Lila owns real estate worth $250,000. She has a mortgage on it with a balance owed of $200,000 and has $50,000 in equity in the property. How much insurance is Lila entitled to purchase for the property? Select one: A. None, because Lila still owes money on the home B. $50,000, because it represents Lila's actual ownership interest C. $200,000, because it is the amount Lila will have to pay the mortgagee in the event of a total loss D. $250,000, because that is Lila's total insurable interest in her home
D. $250,000, because that is Lila's total insurable interest in her home
Since his brother Joe is a jeweler, insurance adjuster Tony has been referring claimants to Joe whenever an insurance jewelry appraisal is needed. Because of this, Joe's jewelry business has grown and he has asked Tony to use him exclusively. As a sign of appreciation for the business referrals Joe takes Tony on an annual fishing trip. This is an example of Select one: A. Subrogation. B. The appraisal process. C. Insurance fraud. D. A conflict of interest.
D. A conflict of interest.
Renter Pete has modified his basement to add a utility sink. Pete maintains that the sink is his personal property while the landlord and the insurance producer believe the sink is a "fixture" under the policy. The utility sink is Select one: A. A part of the landlord's personal property. B. A part of Pete's personal property. C. Not a fixture and therefore is not included in the insurance valuation equation. D. A part of the landlord's real property.
D. A part of the landlord's real property.
Alvin Ross has been informed by his insurance agent that his policy protects against risk of direct physical loss to property. Over time, the walls began to crack and pipes began to break causing extensive damage. Alvin was told that these problems are due to faulty design. Which one of the following statements is true? Select one: A. The burden of proof is on the builder to show that defective design would be a covered loss under a policy which protects against risk of direct physical loss to property. B. The burden of proof is on Alvin to show that fault of the builder is a covered peril. C. Alvin's agent has the burden of proof to show that any cause of loss is covered under Alvin's policy which protects against risk of direct physical loss to property. D. Alvin's insurer has the burden of proof, and if the insurer cannot prove that an exclusion applies based on what caused the loss, then coverage would apply.
D. Alvin's insurer has the burden of proof, and if the insurer cannot prove that an exclusion applies based on what caused the loss, then coverage would apply.
Mary has suffered a total loss of her business. Her building contractor needs to calculate accurate estimates and obtain remodeling or building permits. To draw the plans and provide specifications for the reconstruction of Mary's structure, which one of the following experts may need to be consulted? Select one: A. A restoration specialist B. A salvor C. An engineer D. An architect
D. An architect
The Extended Coverage endorsement and the Broad From endorsement only cover losses that are Select one: A. Caused by risk of direct physical loss. B. Caused by non-named perils not specifically excluded under the policy. C. Caused by catastrophic perils of flood and mudslide. D. Caused by the peril specifically listed in the forms.
D. Caused by the peril specifically listed in the forms.
All of the following items are typically resolved through the appraisal process, EXCEPT: Select one: A. Extent of repair required B. Consideration of repair methods C. Determination of property values D. Coverage questions
D. Coverage questions
Public adjusters are most often involved in presenting which one of the following types of claims to insurers? Select one: A. Bodily injury liability claims B. Vehicle damage claims C. Medical claims D. Fire claims
D. Fire claims
The ordinance or law exclusion typically found in property policies excludes costs resulting from Select one: A. Requirements to replace glass with safety glazing materials. B. Property destruction by an act of government authority. C. Misappropriation of property as a result of unlawful activity. D. Hiring an engineer or an architect to redesign the building to comply with regulations.
D. Hiring an engineer or an architect to redesign the building to comply with regulations.
Sharon and Robin joined in a business venture where they both share in business profits and losses. Also involved in this venture is Larry, who has invested $50,000, which is the extent of his liability in the business. Larry is a Select one: A. Shareholder. B. Joint owner. C. General partner. D. Limited partner.
D. Limited partner.
Because of a public adjuster's need for extensive knowledge of property policies and insurers' claim procedures, many public adjusting firms belong to the Select one: A. Insurance Services Offices. B. State Department of Insurance. C. National Association of Insurance Commissioners. D. National Association of Public Insurance Adjusters.
D. National Association of Public Insurance Adjusters.
Insurers repair and replace property and have for many years worked with camera dealers, furriers, jewelers, and other merchants to replace property for insureds. The volume of business they do with these stores enables insurers to Select one: A. Reduce premiums. B. Detect fraud. C. Salvage more damaged property. D. Obtain discounts.
D. Obtain discounts.
In the investigation step of the loss adjustment process, a nonwaiver agreement avoids the problem of waiving any Select one: A. Deductibles. B. Third-party rights. C. Policy exclusions. D. Policy conditions.
D. Policy conditions.
Few insurance policies explicitly state that their coverage is primary. However, the general rule is, unless the policy states otherwise, coverage is Select one: A. Pro rata. B. Payment by equal shares. C. Excess. D. Primary.
D. Primary.
Contracts of indemnity benefit insureds by Select one: A. Keeping pace with inflation and maintaining full property values. B. Reimbursing them for all losses. C. Assuring them of adequate claim service. D. Restoring them to the same financial condition as they were in prior to the loss.
D. Restoring them to the same financial condition as they were in prior to the loss.
Which one of the following statements regarding the burden of proof is true? Select one: A. Coverage is not afforded for the loss when the insurer has the burden of proof and cannot prove that an exclusion applies. B. The burden of proof is the same regardless of whether the policy is a special-form policy or a specified-perils policy. C. If an insured has the burden of proof and can prove what caused the loss, there is no coverage. D. The insurer must prove, on the basis of a policy exclusion, that the policy does not cover the cause of the damage to avoid paying a claim under a special form.
D. The insurer must prove, on the basis of a policy exclusion, that the policy does not cover the cause of the damage to avoid paying a claim under a special form.
In a covered property loss, adjuster Don is settling a complex claim and knows of a financial interest other than the insured. When making any payment for the loss, Don must ensure that Select one: A. Any party with an interest in the property is being named as a loss payee in the policy declarations. B. The mortgage company is being paid prior to other parties under the contract. C. Only the named insured and mortgage company are being paid under the policy. D. The proper parties are being paid.
D. The proper parties are being paid.
Which one of the following statements is true regarding the issue of concurrent causation? Select one: A. Under the efficient cause approach to concurrent causation, the loss is covered if the "dominant" cause is an excluded peril. B. The insurance industry's position is that a loss is covered if any peril that is not excluded was in any way involved in the loss. C. For an "all-risks policy," jurisdictions following the efficient cause approach put the burden of proof on the insured to prove that the policy covers the dominant cause. D. Under the liberal approach to concurrent causation, the entire loss is covered as long as one of the causes is a covered cause of loss.
D. Under the liberal approach to concurrent causation, the entire loss is covered as long as one of the causes is a covered cause of loss.
An insurable interest exists for an insured Select one: A. When the insured is personally harmed if a piece of property insured was damaged or destroyed. B. When the insured loses a monetary benefit from the preservation and misuse of the property. C. When the insured derives a disadvantage from the destruction and continued existence of property. D. When the insured derives a monetary benefit from the preservation and continued existence of property.
D. When the insured derives a monetary benefit from the preservation and continued existence of property.
Insured Kate has taken articles of clothing to Jim who is the owner of a dry cleaning business. Kate signed a form releasing Jim from liability due to damage of articles in his care. Since, prior to any loss, Kate relieved Jim of his potential liability to her clothing, Kate's insurer Select one: A. Will be liable for any loss to Kate's clothing that occurs in the dry cleaning process. B. Will be able to share the loss with Jim since this is a bailment. C. Will be able to sue Jim's dry cleaning business for any damage that occurs to Kate's clothing left in his care. D. Will waive its rights of subrogation against Jim.
D. Will waive its rights of subrogation against Jim.
