Assignment Quizzes

An insurer has decided to take an extremely narrow interpretation of a property insurance policy provision to limit the number of loss payments it will need to make. It realizes that its interpretation is probably wrong, but it knows that individual insured's loss amounts will be small, such that most insureds will not take the trouble to file lawsuits against it. The insurer may be violating the principle that an insurance policy is

A. A contract of adhesion. B. A contract of indemnity. C. A conditional contract. D. A contract of utmost good faith. D.

When a claim payment is made but the corresponding entry has not yet been made, the payment is registered to

A. A deferred payment account. B. A cash lag account. C. A paid loss account. D. A suspense account. D.

An example of an uninsured motor vehicle under the Personal Auto Policy (PAP) is

A. A hit-and-run vehicle with an unidentified owner that hits the named insured's covered auto. B. An uninsured auto owned by the named insured's spouse. C. An old bus placed on blocks and used as a home. D. A vehicle that is self-insured under state law. A.

Miu is assessing liability in an auto claim. She has reviewed and applied the relevant law, determined the legal defenses that apply to the facts, determined the choices the claimant may have, and determined the degree of liability. In which of Miu's steps did she consider comparative and contributory negligence?

A. Determine the choices the claimant may have B. Review and apply the relevant law C. Determine the legal defenses that apply D. Determine the degree of liability C.

The need for excess or umbrella liability insurance is closely related to three basic issues involved in the use of liability insurance. Which one of the following is one of the three basic issues?

A. Difficulty in estimating minimum possible losses for liability loss exposures B. Effect of aggregate limits C. Required underlying coverages D. Insurer solvency B.

If an employee is operating a vehicle negligently while in the course of employment, which one of the following parties may be found jointly liable as well?

A. Employer B. Customer C. Leaseholder D. Co-worker A.

Benjamin has a lawsuit for damages and injuries he suffered in an auto accident. In addition to his out of pocket expenses, the judge has awarded him ten thousand dollars for pain and suffering. Which one of the following types of damages has Benjamin received?

A. Excessive damages B. General damages C. Collateral damages D. Special damages B.

Which one of the following is an example of premium earned before it is written?

A. Extended reporting endorsement premiums. B. Reinsurance premiums. C. Large deductible credits. D. Audit premium. D.

The Commercial General Liability (CGL) Coverage B—Personal and Advertising Injury Liability provides coverage for which one of the following?

A. False arrest B. Contractual liability C. Criminal acts D. Knowing violation of rights of another A.

Under which one of the following circumstances might an actuary be required to calculate a non-pro rata earning pattern for the premium?

A. For policies in which the insurance risk is not evenly spread throughout the policy period B. For policies in which the insurance risk is the same throughout the policy period C. For multiyear policies in regions with low inflation D. When net earnings are less complex and require less estimation A.

Regarding the selection role of the state insurance commissioner, which one of the following statements is true?

A. Most commissioners are appointed. B. All states have the options of electing insurance commissioners. C. Few commissioners are appointed. D. Incumbent insurance commissioners select their replacements based on specific qualifications. A.

Strict liability continues to apply in

A. Music composer activities. B. Certain situations involving animals. C. Professional liability. D. Certain copyright activities. B.

Deposit accounting may be required by a particular accounting framework for an insurance or reinsurance contract when

A. No risk transfer exists. B. No timing risk exists. C. The reinsurance is considered to be facultative reinsurance. D. The reinsurance is considered to be prospective reinsurance. A.

Defenses to false imprisonment and false arrest for law enforcement officers include which one of the following for felonies?

A. The arrest was made without a legally issued warrant. B. The arrest was made without a warrant but the officer had a report of the crime from a citizen who was not involved in the crime. C. The arrest was made for a crime that was committed in a public place. D. The arrest was made without a warrant but the crime was committed in the officer's presence. D.

In a typical transaction for personal life insurance, which one of the following is the owner of the policy?

A. The insured B. A named beneficiary C. An assignee D. The insured's spouse A.

Which one of the following statements describes the renewability feature found in most level term life insurance policies?

A. The policy is renewable only if the insured increases the amount of coverage by at least 5 percent per year. B. The policy is guaranteed continuable only if the insured periodically provides evidence of insurability. C. The policy is guaranteed continuable for an additional period without the insured needing to prove continuing insurability. D. The policy specifically states that is not renewable. C.

According to the Common Policy Conditions used with the ISO commercial package policy, if a cancellation results in a return payment, the refund would be sent to

A. The producer shown on the declarations page. B. All named insureds, regardless of how many there are. C. The first named insured. D. The person whose countersignature appears on the declarations page. C.

Coverage F—Medical Payments to Others in the homeowners policy applies to bodily injury to a residence employee in all of the following situations, EXCEPT:

A. The residence employee is away from the insured location and is not working B. The residence employee is on the insured location and is working C. The residence employee is on the insured location but is not working D. The residence employee is away from the insured location but is working A.

Some categories of personal property are subject to lower sublimits under Coverage C of the HO-3 policy. Which one of the following is subject to a special limit of liability?

A. Theft of credit cards B. Borrowed property C. Theft of firearms D. Animals C.

Which one of the following statements regarding bailee liability policies is correct?

A. They are written to transfer liability from the property owner to the bailee. B. They are written to protect bailees against legal liability for damage to the property in their care. C. The property owner is a named insured under the policy. D. The insurer would make any payment to the property owner, regardless of liability. B.

An insurance policy is considered a contract of adhesion when it is drafted by the

A. Third party. B. Insurer. C. Insurance commissioner. D. Insured. B.

Which one of the following is a category of the tort of nuisance?

A. Unlawful nuisance B. Nuisance discomfort C. Nuisance invasion D. Nuisance per se D.

Coverage for other structures is automatically provided under the HO-3 policy with a limit that is

A. 10% of the Coverage A limit. B. 10% of the Coverage C limit. C. 50% of the Coverage A limit. D. 50% of the Coverage C limit. A.

The two principal liability accounts on an insurer's balance sheet are

A. Deferred acquisition costs and reinsurance recoverables. B. Claim liabilities and unearned premium. C. Earned premium and loss reserves. D. Unpaid adjusting expenses and reinsurance receivables. B.

Li insured his car with a Personal Auto Policy (PAP) that has split limits for liability coverage of $50/$100/$25. He was found by a court to be at fault for an accident that injured the other driver and ordered to pay a judgment of $45,000, plus $5,000 in prejudgment interest. How much will Li's insurer pay under his PAP?

A. $25,000 B. $30,000 C. $45,000 D. $50,000 D.

UD Building Supply has a CGL policy with a Deductible Liability Insurance endorsement with a $5,000 per-claim deductible. One snowy Saturday, two customers fell in the parking lot and one slipped and fell inside the store. The claimants were awarded damages of $6,500, $3,500, and $9,000. How much will the insurer pay?

A. $5,500 B. $9,000 C. $14,000 D. $15,500 A.

Coleman Manufacturing Company (CMC) has an unendorsed CGL policy with the following limits of liability: Each occurrence $1,000,000 Medical expense $5,000 Personal and Advertising Injury $1,000,000 General Aggregate $2,000,000 Products-Completed Operations Aggregate $2,000,000 CMC's insurer has already paid three claims under the policy. They include a $600,000 products liability claim, a $450,000 premises/operations claim, and a $350,000 personal and advertising injury claim. CMC has now been found liable for another products liability claim for $1,100,000. How much would CMC's insurer pay for this claim?

A. $600,000 B. $1,000,000 C. $1,050,000 D. $1,100,000 B.

Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio. While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $150,000; ii) damage to the bike repair shop building rented to Dan - $250,000; iii) damage to the remainder of the building - $300,000; iv) damage to Jane's business personal property - $80,000 and v) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000. Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. Dan's insurer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000 and the policy general aggregate is $2,000,000. Under the Commercial General Liability policy, how much will the insurer pay for all damages?

A. $780,000 B. $850,000 C. $930,000 D. $1,000,000 A.

Liana insured her car with a Personal Auto Policy (PAP) that has split limits for liability coverage of $100/$300/$75. She was found by a court to be at fault for an accident that injured the other driver and ordered to pay a judgment of $98,000, plus $6,000 in prejudgment interest. How much will Liana's insurer pay under her PAP?

A. $92,000 B. $98,000 C. $100,000 D. $104,000 C.

Juan, owner of Premier Data Systems, has decided to insure his company with a Building and Personal Property Coverage Form (BPP). Because he is concerned about selecting the correct coverage limits for his building and business personal property, his agent suggests that he add the Agreed Value optional coverage. Agreed Value optional coverage is often elected by risk averse firms in order to

A. Allow the firm to insure their building and contents for an amount greater than replacement cost. B. Alleviate the risk of not complying with the Coinsurance condition. C. Avoid the application of multiple deductibles in the event of several losses resulting from a single occurrence. D. Waive any insurance to value requirements in most commercial leases. B.

Which one of the following statements is correct with respect to Property Not Covered under the Building and Personal Property Coverage Form (BPP)?

A. Almost all of the items listed in the Property Not Covered section are considered to be uninsurable. B. ISO manual rules prohibit removing the exclusion of any of the items specified under Property Not Covered. C. Only contraband or property in the course of illegal transportation or trade is totally uninsurable by endorsement or in other policies. D. By endorsement, insurance can be made available for any of the items listed in the Property Not Covered section. C.

Disagreement exists regarding whether appointment or election of a state insurance commissioner better serves the public. Proponents of an elective system cite which one of the following reasons?

A. An appointed commissioner is generally not subject to dismissal. B. An elected commissioner is less likely to be swayed by ill-informed public opinion. C. An elected commissioner is more likely to be perceived as interested in insurance regulation. D. An elected commissioner would be keenly aware of the issues important to the public. D.

The Commercial General Liability (CGL) Coverage Form defines the term "occurrence" as

A. An incident, sudden and accidental in nature, causing bodily injury or property damage. B. An accident, including continuous or repeated exposure to substantially the same general harmful conditions. C. An accident, causing bodily injury or property damage, that occurs suddenly. D. An incident resulting from repeated exposure to substantially the same general harmful conditions. B.

Which one of the following professional liability policies is most likely to exclude coverage for bodily injury?

A. Architect's professional liability B. Healthcare professional's professional liability C. Accountant's professional liability D. Engineer's professional liability C.

Ideally insurable loss exposures are subject to losses that

A. Are definite in time, cause, and location. B. Occur gradually over long periods of time. C. Are immeasurable in terms of frequency or severity. D. Result from unidentifiable causes. A.

Property owners who purchase an insurance policy should be listed on the policy as

A. Beneficiaries. B. Named insureds. C. Mortgageholders. D. Bailees. B.

Insurance that shows a separate limit for each building and a separate limit for personal property in each building is

A. Blanket insurance. B. Specific insurance. C. Individual insurance. D. Monoline insurance. B.

An insured is reviewing the commercial package policy (CPP) to determine which conditions apply to all coverage parts in the policy. One of those conditions states that

A. Changes can be made by the insurer or insured by verbally contacting the other. B. The insurer has the right to do an on-site inspection of the insured's books and records. C. The insurer will inspect the property to verify compliance with safety regulations. D. Both the insured and insurer must cancel the policy with 30 days notice for certain reasons. B.

Which one of the following would be an exception to the Coverages E and F Business exclusion to the liability coverage provided by the HO-3 policy?

A. Charging neighborhood families for home daycare services B. Teenage son of named insured painting neighbor's fence in exchange for a few dollars C. Full-time beauty salon in the home D. Full-time landscaping business B.

When uncertainty exists, a conflict can arise between reliability and

A. Completeness. B. Transparency. C. Lack of bias. D. Verifiability. C.

Day-to-day regulation of the insurance business is performed by state insurance departments, which fall within each state government's

A. Consumer branch. B. Judicial branch. C. Executive branch. D. Legislative branch. C.

Insurance policies are written in such a way that the parties have to perform only under certain conditions, because an insurance contract is a

A. Contract of adhesion. B. Contract of indemnity. C. Conditional contract. D. Contract of utmost good faith. C.

An insurer will make a loss payment if an insured loss occurs and if the insured performs certain duties. This illustrates that an insurance policy is a

A. Contract of adhesion. B. Contract of indemnity. C. Conditional contract. D. Personal contract. C.

Which one of the following is an example of a supplementary payment under the liability coverage of the Personal Auto Policy (PAP)?

A. Cost of bail bonds B. Emergency response assessment C. Traffic violation fines D. Pre-verdict interest A.

Under the liability coverage in the Personal Auto Policy (PAP), the insurer agrees to pay

A. Costs incidental to claims not covered by the policy. B. Defense costs incurred by the insurer. C. Judgments in excess of the liability limits. D. Judgments for bodily injury intentionally caused by the insured. B.

Professional liability insurance is written on forms developed by individual insurers and as a result may differ considerably. Although they differ, the policies all provide for

A. Coverage for rendering or failing to render professional services. B. Coverage for the same professional acts and consequences. C. Insurance for the same professional persons and organizations. D. The same coverage territories and policy exclusions. A.

Keith created a tennis ball return machine favored by tennis professionals because of the high velocity of the machine. The speeds of return are random which is clearly posted on the machine. A 13-year-old tennis player loses his eye in an accident due to a ball returned at a very high speed. In this situation, the type of product defect that would most likely lead to a liability suit against Keith is which one of the following?

A. Defect in design B. Defect in manufacture C. Failure to warn D. Defect in assembly C.

There are a number of reasons that organizations find that they need excess or umbrella liability insurance. Which one of the following statements most accurately describes how organizations go about establishing their need for excess or umbrella liability insurance?

A. For those insureds that wish to increase their retentions, excess liability insurance is more suitable for use as a supplement to self-insured retentions than umbrella liability insurance. B. Insureds often purchase excess or liability insurance coverage because their primary insurers are unwilling to provide adequate limits within the primary insurance layer. C. Insureds must first establish an accurate measure of their maximum possible loss for liability exposures before they can even consider purchasing umbrella or excess liability insurance. D. Excess liability insurance is usually purchased as a supplement to an existing primary insurance layer, while umbrella liability insurance is usually used as a primary layer. B.

A typically available cyber risk coverage that protects an insured when a thief transfers money from an insured organization's account to his own account is called

A. Fund transfer fraud. B. Cyber extortion. C. Regulatory action. D. Network security liability. A.

Which one of the following statements is true regarding "aircraft liability" coverage under the HO-3 policy?

A. Hobby aircraft that do not carry people or cargo are considered to be "aircraft" in the HO-3 policy. B. Model airplanes that do not carry people or cargo are considered to be "aircraft" in the HO-3 policy. C. The homeowners policy excludes all aircraft liability. D. If the insured flies her radio-controlled model airplane through a neighbor's picture window, the resulting liability claim would not be covered. C.

ABC Company manufactures hot beverage containers and distributes them to various retail outlets. A customer who purchased one of these containers at a retail store is burned by hot coffee after the lid on a container falls off. Which one of the following principles of law would be the basis for a suit brought by the injured party?

A. Implied warranty B. Express warranty C. Assumption of risk D. Misrepresentation A.

An individual who stands to suffer a monetary loss if a given property were damaged, destroyed, lost, or stolen is said to have

A. Indemnification in the property. B. An insurable interest in the property. C. Right of first refusal to a claim on the property. D. A claim on the property. B.

Stulford Insurance Company (Stulford) has recently written a new dwelling fire policy. Its definition of actual cash value is not as clear as the previous version and may lead policyholders to misinterpret the term actual cash value. Which one of the following would most likely cause Stulford to redraft its policy language with a new definition?

A. Insurance department regulation B. System for Electronic Rate and Form Filings C. Court decisions D. National Association of Insurance Commissioners C.

Becky, the owner of Becky's Muffin Shop, sees a teenage boy take a cookie from the counter and start to leave the store without paying for the cookie. Becky intends to injure him as punishment for his misdeed. She tackles the boy, pins his arms behind his back, and pushes his face to the floor until the police arrive. The boy suffers a cracked rib, dislocated shoulder, and broken nose. Which one of the following exclusions in the Commercial General Liability (CGL) Coverage Form applies to this occurrence?

A. Insured's products and work exclusion B. Expected or intended injury exclusion C. Employers liability exclusion D. Malicious acts exclusion B.

Prior to settlement of a claim under Contractor Andy's commercial general liability (CGL) policy, Andy declared bankruptcy. Due to Contractor Andy's bankruptcy proceeding, what is the obligation of Contractor Andy's insurer?

A. It is relieved of its obligation to defend Contractor Andy under the CGL for this and any subsequent claims. B. It must pay the claim according to state-mandated minimum settlement amounts. C. It is obligated to distribute remaining claim settlement amounts to the state guaranty fund. D. It is obligated to defend Contractor Andy and pay judgments or settlements as though Contractor Andy had remained solvent. D.

Which one of the following statements is correct with respect to the Non-Owned Detached Trailers coverage extension of the Building and Personal Property Coverage Form (BPP)?

A. It permits the insured to extend "your business personal property" to include trailers leased to expand office space or to provide additional storage or work areas. B. The trailer can be used anywhere in the United States. C. The coverage applies while the trailer is attached to any motor vehicle or motorized conveyance, provided it is not in motion. D. Coverage is available only if the insured has no contractual responsibility for loss or damage to the trailer. A.

Which one of the following statements about the Liquor Liability Coverage Form is true?

A. It provides product liability coverage for the named insured. B. It provides coverage for bodily injury only. C. It contains an each common cause limit as well as an aggregate limit. D. It contains a deductible that applies only if injury arises when a required liquor license is not in effect. C.

Which one of the following statements about a typical term life insurance policy is true?

A. It terminates without value at the end of the specified period of coverage. B. It can be converted to any other form of term insurance. C. It is not issued for policy periods that are longer than five years. D. It has a higher initial premium than permanent forms of life insurance. A.

A disadvantage of coverage from nonaffiliated local insurers as an international insurance solution is

A. Lack of claim support. B. The inability to maintain a "good citizen" image. C. Lack of economies-of-scale. D. Poor matches of coverage with local requirements. C.

Which one of the following types of insurance claims are most likely to be covered by all state guaranty funds?

A. Life insurance and annuity insurance claims B. Mortgage guaranty and title insurance claim C. Accident and health insurance claims D. Homeowners and auto insurance claims D.

Patty bought a particular brand of windows because they were warranted free of defect for the lifetime of the purchaser. If anything happened the windows were guaranteed to be replaced at no cost to the original owner. Six years later, two of the windows began to fog between the panes. Patty had them replaced and was billed $600 for labor and materials. Patty sued the window company stating she would not have purchased them except for the future no-cost guarantee. Patty's best basis for the lawsuit is

A. Misrepresentation. B. Absolute liability. C. Negligence. D. Implied warranty of merchantability. A.

Bob visits the town square on New Year's Eve for a celebration. While there, a scuffle occurs causing the crowd to surge forward. Bob is accidentally knocked down by Jim and suffers an injury to his arm. Soon after a police officer responding to the initial incident runs into and knocks Bob down, causing an injury to his knee. Does Bob have grounds for bringing action against Jim and the police officer for battery?

A. No, because Jim can assert the defense of consent and the police officer can assert the defense of physical discipline. B. No, because the contacts by both Jim and the police officer were accidental and not intended to be hostile or offensive. C. Yes, because both Jim and the police officer did not exercise reasonable care in preventing injury to others by their actions. D. Yes, because the bodily contact by both Jim and the police officer was more than "incidental" and resulted in actual bodily harm. B.

A group of high school seniors released a greased pig into their school as a prank. The terrified pig ran frantically through the halls, knocking students over and causing minor property damage. Eventually the pig was caught by the principal, who locked it in a cage in the teacher's lounge. Several hours later, a janitor who enjoyed the chase decided to open the cage and let the pig run around in the lounge area. During the pig's second run, a teacher was knocked down and injured. Which one of the following statements is true?

A. Only the janitor is responsible for the teacher's injuries. B. The group of seniors is responsible for the teacher's injuries. C. The janitor and the group of seniors are responsible for the teacher's injuries. D. The principal and the janitor are responsible for the teacher's injuries. A.

Life insurance may be temporary or permanent. Which one of the following major categories of life insurance provides temporary coverage?

A. Ordinary whole life insurance B. Variable universal life insurance C. Term life insurance D. Universal life insurance C.

Which one of the following items, owned or installed by the insured, is covered under the Building and Personal Property Coverage Form (BPP) as business personal property?

A. Permanently installed machinery and equipment B. Fixtures, including outdoor fixtures C. Completed additions to a building D. Building contents such as furniture D.

Which one of the following is an advantage of providing international insurance coverage through a nonaffiliated local insurer?

A. Policy premiums are lower. B. It promotes a good foreign image. C. The insurer's solvency is ensured. D. It allows a sharing of responsibility. B.

A security guard at SC Clothing Store stopped a customer from leaving the store and wrongfully accused the individual of shoplifting. The individual filed a suit against SC Clothing Store. Which one of the following coverages under the store's Commercial General Liability (CGL) policy would provide coverage for this loss?

A. Professional Liability B. Bodily Injury and Property Damage Liability C. Personal and Advertising Injury Liability D. Medical Payments C.

Tommy has recurring nightmares about an auto accident in which he was injured. Two years ago he was subjected to several reconstructive surgeries leaving him with phantom pains due to the loss of one of his legs. Tommy's highly unpleasant mental reactions may indicate an additional award based on

A. Punitive damages. B. Pain and suffering damages. C. Special damages. D. Emotional distress damages. D.

A large electronics assembly company headquartered in the United States bought a supplier that owns a small manufacturing plant in Vietnam. Having studied the manufacturer's local insurance program, the assembly company feels confident in the insurer's solvency and insurance coverage and plans to retain the local coverage. One disadvantage of retaining the local coverage instead of insuring the manufacturer with the assembly company's insurer in the United States is that the assembly company

A. Shares insurance decisions. B. May receive questionable claim service. C. Must handle complicated foreign taxes. D. Lacks central control and continuity of protection. D.

Which one of the following statements concerning site-specific environmental impairment liability insurance policies is most accurate?

A. Site-specific environmental impairment liability policies are typically written on an occurrence basis, but may be endorsed to provide coverage on a claims made basis. B. Because of the potential for virtually unlimited losses, site-specific environmental impairment liability policies typically cover only bodily injury and not property damage. C. Defense costs are usually excluded from site-specific environmental impairment liability policies to keep the premiums lower. D. Site-specific environmental impairment liability policies typically cover only losses that arise from pollution that occurs on, occurs at, or emanates from a site listed in the declarations. D.

Which one of the following constitutes the tort of battery?

A. Snatching a paper from the hand of a person who did not want it taken away B. Threatening to kill a person's pet C. Obstructing or blocking the passage of a person by blocking her way with barrels D. Pointing a knife at a person A.

Which part of Coverage C—Personal Property of the HO-3 policy identifies lower limits for specified types of covered property?

A. Special Limits of Liability B. Declarations C. Exclusions D. Property Not Covered A.

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP)?

A. The BPP covers business personal property and property of others up to a specified percentage of the building coverage limit. B. The BPP must be written to provide coverage for all of the following: buildings, business personal property, and personal property of others. C. The BPP lists several classes of property or kinds of property losses that do not qualify as covered property. D. The BPP provides coverage against both direct and indirect loss or damage caused by a covered cause of loss. C.

In the United States, the top organization in the rules hierarchy for Generally Accepted Accounting Principles has designated which one of the following organizations as the accounting standard setter (although its rules are subject to veto)?

A. The Securities and Exchange Commission (SEC) B. The Financial Accounting Standards Board (FASB) C. The International Accounting Standards Board (IASB) D. The American Institute of Certified Professional Accountants (AICPA) B.