AR Property and Casualty Perp
If the workers employed by a factory are assigned a workers compensation classification code with a rate of $8.00 and the employer has payroll of $200,000 for that classification code, what is the unmodified premium for that classification?
$16,000
Transportation expenses cover up to:
$20 per day with a maximum of $600
How do a hazard and a peril differ?
A hazard is a condition that increases the frequency and severity of loss while a peril is a cause of loss.
Which of the following benefits is not paid by workers compensation?
Benefits for pain and suffering
Sporting Life Insurance Company is incorporated in Texas but transacts insurance in Arkansas. Which type of insurer is Sporting Life considered in Arkansas?
Foreign
A contract that potentially provides one party considerably more than the other party may receive from it is called a(n):
aleatory contract
Terry has been licensed as a property and casualty insurance producer in Arkansas for ten years. To maintain his license, how many hours of continuing education must he complete every two years?
24
Within how many days must an insurer notify the Commissioner after terminating a producer's appointment?
30
Excelsior Insurance Company wrote premiums of $100 million last year and incurred expenses of $40 million in that same time period. What is this insurer's expense ratio?
40%
A leased auto may be listed in the declarations in a personal auto policy (PAP) if it is leased to the named insured under a written contract for at least:
6 months
What percentage of a worker's average weekly wage will be paid to a worker who suffers from a disability?
66.66%
Donaldson Insurance Company had earned premiums of $100 million last year and incurred losses of $75 million in that same time period. What is this insurer's loss ratio?
75%
Losses from which of the following incidents would be excluded under standard property insurance?
A furnace malfunctions and shuts off the heat.
Which of the following statements correctly describes the difference between an open perils policy and a named perils policy?
A named perils policy requires the policyowner to show the cause of loss is covered, while the insurer has the burden of proving that the loss is excluded with an open perils policy.
Which of the following would be considered an indirect loss?
Additional living expenses are incurred while a person whose house was damaged lives in a hotel while the home is repaired.
Alpha Beta Insurance Company is incorporated and headquartered in Canada, and is licensed to conduct business in Arkansas. What type of insurer is Alpha Beta considered in Arkansas?
Alien
Stanley applied for but could not obtain fire protection coverage for his barn and silo, which are located in a remote rural area in Arkansas. Through which entity might he be able to obtain coverage?
Arkansas Rural Risk Underwriting Association
When must insurers notify existing policyholders who do not have residential earthquake insurance that coverage may be available through the Market Assistance Program or the Arkansas Earthquake Authority?
At least three times over a four-year period
Which of the following statements regarding written and oral binders is correct?
Both types are legally binding, but a written binder is preferable because it reduces the likelihood of a dispute over terms.
Clark sued his insurance company because it didn't pay his claim, saying he found the wording in his policy vague and ambiguous. Based only on this information, in whose favor did the Court render judgment?
Clark's, because the policy is a contract of adhesion
Bill sells insurance for Acme Insurers, which he knows is not authorized to transact insurance in Arkansas. Which penalty might Bill face?
Class D felony
Seth, an agent, decides he must protect himself from potential claims from policyholders, both legitimate and illegitimate. What are some methods by which he can protect himself in the event of such a claim?
Document conversations with policyholders about insurance transactions and consider errors and omissions coverage.
What commercial crime endorsement provides coverage when an employee is held captive and forced to surrender money because of an immediate threat to his physical safety?
Extortion--Commercial Entities
Which of the following has primary responsibility for enforcing the Arkansas insurance laws and regulations?
Insurance Commissioner
James is a licensed producer who lives in Little Rock. He moves his office to Perryville on July 1. He is required to notify the Commissioner of this move no later than what date?
July 10
What federal law provides workers compensation benefits to employees who load, unload, repair, and build vessels in maritime employment?
Longshore and Harbor Workers' Compensation Act (LHWCA)
Dispatch Management, a warehousing operation, employs a large crew, some of whom are occasionally assigned to the docks at seaports along the northeast coast to load and unload ship cargo. What endorsement must Dispatch add to its workers compensation insurance to ensure that the crew occasionally working the docks is eligible to receive medical and lost wage benefits if injured on the job?
Longshore and Harbor Workers' Compensation Act Coverage endorsement
The Allen Agency of Chicago, Illinois, represents an insurance company that is headquartered in Baltimore, Maryland, and which has agencies in 30 states. To an agent in the Allen Agency, where is her insurer domiciled?
Maryland
Which type of insurer is incorporated, owned by its policyholders, but does not have capital stock?
Mutual insurer
Eamon's Clothing Store has commercial crime coverage in the form of inside premises -- theft of money and securities. The manager hires Russell who was fired from a previous job for stealing merchandise. Nevertheless, the manager trusts that Russell has changed his ways. A month later, Russell is found to have stolen cash from the register and is fired. Eamon's files a claim with the store's insurer. Is the loss covered?
No, because the manager knew of Russell's criminal background.
Jack is selling his home to Sue and wants to transfer his homeowners policy to her. Can Jack transfer his policy?
No, unless the insurer gives written consent to do so.
Ascent Insurance Company receives a claim from its insured on October 1. Although it promptly begins to investigate the claim, it soon determines that it will be unable to complete its investigation before December 1. Which of the following actions should it take with respect to the claimant?
Notify the insured by November 15 that additional time is necessary for the investigation, and give reasons for the additional time.
If the Commissioner finds that an agent engaged in an unfair method of competition or an unfair or deceptive business practice, he or she may do all of the following EXCEPT:
Order the agent to pay restitution
Agents or producers have an obligation to act in the best interests of applicants or insureds. Which of the following is not a duty an agent owes to an applicant or insured?
Retain legal counsel to advise the insured or applicant who buys complex coverage.
Abstract Chemical Corp. cannot find an insurer in its home state that will provide a certain type of liability insurance that it needs. What is the best option for Abstract Chemical?
Seek coverage through a nonadmitted insurer that can provide excess and surplus lines insurance.
Vanessa borrowed her friend's pickup and crashed it into a brick wall, totaling it. When she submits a claim under her personal auto policy for the destroyed pickup, her insurer says it won't make payment until a condition is met. What is that condition?
The pickup truck owner's policy must pay first.
Toby knows that another agent is submitting fraudulent claims to various insurers but does not report the fraud. Which statement is correct?
Toby is guilty of a Class A misdemeanor.
Which of the following correctly describes the difference between uninsured motorists coverage (UM) and underinsured motorists coverage (UIM)?
UM applies when the at-fault motorist does not have auto insurance; UIM responds when the at-fault motorist is insured with a liability limit less than the insured's UM/UIM limit.
Arbitration is the submission of a dispute to one or more impartial persons for a final and binding decision. With regard to auto insurance, arbitration can be used to resolve disputes involving which coverage?
UM/UIM
First Street Supply Company has a good business relationship with its main customer, Alliance Metals, which it wants to maintain even if a First Street employee were to get injured while visiting Alliance's factory. Which of the following endorsements might First Street add to its workers compensation policy to minimize potential disputes should that ever happen?
Waiver of Our Right to Recover from Others endorsement
The counterfeit money insuring agreement of a U.S. bank's financial institution bond covered the loss resulting from its acceptance of counterfeit money in Guatemala, which means that National Bank must have:
a branch office in Guatemala
In determining the degree of care that is required by a property owner for the safety of people on his or her property, which of the following would be considered a trespasser?
a neighbor who "crashes" a party at the property owner's home
All of the following are treated as uninsured motor vehicles for purposes of the personal auto policy EXCEPT:
a vehicle that does not carry uninsured motorist coverage
All of the following sources of information are commonly used in the underwriting review process EXCEPT:
academic records
Which of the following is not a type of casualty insurance?
accidental dismemberment
When Mr. Huan's piano was damaged by vandals who broke into his house, the insurance company subtracted $200 for depreciation when it made its settlement offer. On what basis did the insurer value Mr. Huan's loss?
actual cash value
Robin has a valuable porcelain collection she wants to insure. Because it's difficult to assess the collection's value, Robin and her insurer have worked out a schedule listing the value of each insured item. What valuation method have they used?
agreed value
Suitability standards for making insurance policy recommendations apply to:
all insurance policies
Jane's insurance policy contains a stated amount valuation provision. This provision states that she will receive the lowest of three amounts if her covered property is stolen or destroyed. Which of the following is NOT one of those three amounts?
an amount agreed upon by the insurer and Jane
Steve and his insurance company are unable to agree about the amount of damage his car sustained in a collision. What process may either party choose to determine the value of the loss?
appraisal
The primary insurance regulatory activities of state insurance departments include all of the following EXCEPT:
arresting unethical producers
A business that owns a commercial general liability (CGL) policy will be covered for all the following exposures EXCEPT:
auto liability and professional liability
In addition to a property owner, what other parties might have an insurable interest in the property?
bank or mortgage holder
Which type of insurance covers loss or damage involving vehicles, glass, elevators, and boiler and machinery equipment?
casualty insurance
A consumer who wants objective information about the financial reliability of an insurance company from which he is considering the purchase of insurance would be best advised to:
check the company's financial rating from an established rating organization
Even if the cause of loss is covered, an insurance policy can stipulate that to be eligible for claim settlement a loss must be reported to the insurer within 20 days of the date of loss, because insurance policies are:
conditional contracts
Dale was driving his car when he was involved in a head-on collision. Though he only suffered minor bruises, his car was damaged extensively. The repairs are estimated to cost $13,500. The actual cash value of his auto before the collision was $16,000. His insurer will most likely treat his claim as a:
constructive total loss
Randy goes to Main Street Insurance Company to buy a homeowners policy. He observes that he cannot negotiate the terms with the insurer, which presented the policy to him on a take-it-or-leave-it basis. This type of contract is considered a(n):
contract of adhesion
Mrs. Olson is flying from Boston to Los Angeles when she is held against her will on the airline. Under what insuring agreement on the Kidnap/Ransom forms of her commercial crime policy will coverage be provided for the expenses related to her confinement?
detention or hijacking
Patrick has a commercial property insurance policy that does not cover damage caused by an earthquake. He is interested in obtaining earthquake coverage. He read that it is possible to obtain a separate policy insuring against this specific peril and it was referred to as a(n):
difference-in-conditions policy
Mary Beth is employed by the JKL Insurance Company in its home office to market its insurance policies directly to consumers through the use of mass media and social media promotions. She is employed by what type of marketing system or arrangement?
direct marketing system
Reginald, an eager new insurance salesman, persuades Tom to switch his auto policy to a company Reginald represents because Tom can save several hundred dollars. However, Reginald does not tell Tom the recommended policy provides substantially less coverage. Reginald has failed to meet his duty to:
disclose all pertinent information concerning the proposed policy
Which of the following is an example of a risk avoidance technique for someone who wants to avoid the risk of being sued because her dog bit someone?
do not own a dog
Jackson Hardware has a basic property policy. Which of the following perils is NOT typically covered under such a policy?
earthquake
Which of the following types of liability insurance deals with claims that involve errors or omissions in administering a company's group health insurance policy and 401(k) plan?
employee benefits liability
Susan is the HR manager of a technical support firm that is sued by Hank, a programmer formerly employed by the firm. Susan fired Hank due to his unsatisfactory work performance, but Hank claims he was a wrongfully terminated because he reported Susan's misconduct to a government regulator. What type of insurance would cover this situation?
employment practices liability (EPL) insurance
The federal Motor Carrier Act (MCA) of 1980 requires certain motor vehicles to carry minimum limits of insurance for public liability and:
environmental restoration claims
Which of the following types of insurance can protect an insurance agent who is sued by a policyowner over an unintentional mistake the agent made when completing the application for insurance?
errors and omissions (E&O)
Tim, an insurance producer, tells you his is concerned about liability that may arise if he fails to fulfill his duties to his insurers or customers. What kind of insurance would you suggest he buy to protect him from this liability?
errors and omissions insurance
Which of the following is a peril?
fire
Morgan Transportation is in the business of transporting cargo by truck. It enters into contracts with other businesses to move their cargo. Which of the following terms most accurately describes Morgan Transportation? private carrier
for-hire carrier
Most insurance regulation in the United States is conducted by the:
individual states
Which of the following property insurance exclusions would eliminate coverage for damage to house siding caused by drops of condensation falling from a window air conditioner?
leakage or seepage exclusion
What property insurance exclusion, if any, might eliminate coverage for clean-up costs associated with a mice infestation in a home?
maintenance or wear-and-tear
Though she lives in a high crime area, Hilda rarely locks the door to her apartment when she goes out, figuring that whatever she owns of value is insured and can be easily replaced if stolen. What type of hazard does this represent?
morale hazard
Susan is in a collision with another motorist and files a collision claim with her auto insurer. The adjuster inspects the damage to her car and writes an estimate that includes replacing the damage with aftermarket parts, which are also known as:
non-OEM parts
A pipe suddenly bursts in a basement and floods an area where new carpeting was recently installed. What exclusion, if any, might eliminate coverage?
none, because the loss would be covered
State Bank has a financial institution bond with seven separate insuring agreements. Which of these agreements is the bank's only source of recovery for money and securities lost in a fire, windstorm, or explosion?
on-premises insuring agreement
A cause of loss is called a(n):
peril
Trumbull Motors' liability policy paid first when its employee was test-driving and caused an accident. Which of the following terms correctly describes what type of coverage Trumbull Motors' policy provides?
primary
In the relationship between an insurance company and a producer that sells its products, what role does the insurer play?
principal
The Union Theater had two property policies in place the day it was destroyed in a fire. How did coverage apply under the policies if each made claim payment in proportion to the limits of liability contained in the policies?
pro rata
A father and his young son are shopping in a toy store for the boy's birthday present. The boy cuts his thumb on the edge of a plastic model airplane. The toy manufacturer's commercial general liability policy will cover the claim if the manufacturer has which type of insurance?
products and completed operations liability
A marine insurance policy will cover damage to piers and docks that is caused by
rain
With respect to the personal auto policy (PAP), which of the following correctly defines "actual cash value"?
replacement cost minus depreciation
Mrs. Grant's home suffered a fire. The contractor tells Mrs. Grant it will cost $10,000 to repair the damage and restore her home so it's exactly the same as it was before the fire. What valuation basis did the contractor explain to Mrs. Grant?
replacement value
Mr. Davidson does not own car insurance. If his car sustains a loss, he will pay for the damages and injuries himself. What method of handling risk has he chosen?
retention
Brad purchased an auto insurance policy to insure his new car. An insurer might consider Brad, his car, or both to be a:
risk
What is the term used in a property insurance policy to describe damaged property?
salvage
The Health Insurance Portability and Accountability Act (HIPAA) affects property and casualty insurers because medical information may be used in each of the following situations EXCEPT:
settle a claim for stolen property
Liability that exists simply because an act or situation is inherently dangerous by its very nature, thus making a person responsible for a plaintiff's injuries or damage even when the person has not been careless or negligent, is called:
strict (absolute) liability
In the course of doing their job, insurance producers are required to do all of the following EXCEPT:
submit a signed affidavit to the applicant that the proposed policy is the most suitable
In a residential neighborhood where most of the homeowners have small children, which of the following structures in a homeowner's yard could be the attractive nuisance?
swimming pool
During the sale of an insurance policy, all the following are duties of an insurance producer EXCEPT:
to arrange for financing of the policy if the applicant is unable to do so
How many declarations are contained in a commercial general liability policy?
two
Transacting insurance includes all of the following EXCEPT:
underwriting insurance contracts
In what type of contract is only one party required to make an enforceable promise?
unilateral contract
Insurance companies and policyholders rely on the honesty and disclosures of the other party when negotiating the sale of insurance policies, which is why insurance policies are considered to be contracts of:
utmost good faith
Santucci Brothers Grocery employs a high school student to deliver groceries. When the student accidentally runs over a customer's dog when pulling into the customer's driveway, which of the following terms accurately describes Santucci Brothers' legal responsibility for the employee's action?
vicarious liability
