Casualty Fundamentals Review Questions

A municipality soliciting bids on a city reservoir project requires each bidder to post a Bid Bond. In requiring these bonds, the municipality is: A.) Protecting itself as obligee B.) Promising that it will pay for the completed work. C.) Providing the principal with a surety. D.) Acting as a surety on the project.

A. Bid bonds guarantee the contractors will enter into a contract if it is awarded to them.

Which of the following is not covered under Personal Injury (HO 24 82)? A.) Broken leg B.) Libel C.) Wrongful entry D.) Defamation of character

A. Bodily injury, such as breaking a leg, is not covered under Personal Injury.

Hank died in an industrial accident. His 19-year old son, Glen, is working full time. How many years will Glen be able to receive income benefits from Hank's employer's Workers Compensation policy? A.) 0 years B.) 2 years C.) 7 years D.) 20 years

A. Children are only eligible until age 18 for death benefits from Workers' Compensation, and Glen is already 19.

For which of the following is physical damage coverage on a PAP not excluded? A.) Customization of a van as endorsed on the policy B.) Radar detectors C.) Theft of a stereo that the car owner has plugged into the speaker unit of the car when he is driving D.) A tire that suffers a blowout while the car is being driven.

A. Customization of a van, if endorsed on the policy, is covered.

Which section of the insurance policy explains the premium amount? A.) Declarations B.) Insuring Agreement C.) Conditions D.) Exclusions and Endorsements

A. The premium is stated in the Declarations part of a policy.

Why is it important to have a large group of individuals insured? A.) The larger the group, the more accurate statistical assumptions will become. B.) The larger the group, the more profit can be made by the insurer. C.) Policies can only be written on large groups. D.) Small groups tend to have more claims.

A. Under the Law of Large Numbers, the bigger the observed sample, the more accurate the predicted results

Which of the following is not included under the Limited Fungi endorsement? A.) Removal of the fungi when discovered. B.) Air testing to confirm the absence of the fungi if there is reason to believe it is there. C.) Damage caused by fungi the insured always has known existed. D.) Removal and replacement of any part of the building needed to gain access to the fungi.

C. The resulting damage from the fungi must be unknown to all insureds and be hidden in a covered structure.

How long a period does an insured have to report a loss covered by a Commercial Crime policy? A.) During the policy period only. B.) Two months after the policy ends. C.) One year after the policy ends. D.) Indefinitely, as long as the maxi-tail has been purchased

C. There is a one year discovery period for Commercial Crime policies.

KNEET Contractors subcontracts electrical work to local electricians. To protect themselves from liability that may arise from work that the electricians complete, KNEET requires the subcontractors to purchase: A.) Products and Completed Operations. B.) Contractual Liability. C.) Contingent Liability. D.) Premises and Operations.

C. Under the Contingent Liability, the person to do the work, the electrician, would alone be responsible for the work done.

Michael's briefcase of papers, valued at $2,000, have been destroyed. How much is covered under his BOP? A.) $800 B.) $1,450 C.) $1,000 D.) $200

C. Valuable papers are only covered up to $1,000.

Barb broke her leg when she fell down the stairs at work. The cost of the medical bills and Barb's salary for the 4 days she was off work would be paid for by: A.) Barb's health insurance policy. B.) The employer's liability/medical insurance policy. C.) The employer's Workers' Compensation policy. D.) The employer's Personal and Advertising Injury Policy.

C. Workers' Compensation covers medical bills and income benefits for disabilities after a 3 day waiting period and Barb did not return to work for 4 days.

An insurer chartered under the laws of one of the states other than the one in which it is transacting business is a(n): A.) Domestic insurer B.) Alien insurer C.) Non-resident insurer D.) Foreign insurer

D. A foreign insurer is an insurer transacting business in a state but chartered under the laws of a different state or one of the U.S. territories

Justine is suing John, believing she has the right to property that he has in his possession. To stop him from selling the property, Justine should obtain a: A.) Surety bond. B.) Performance bond. C.) Fiduciary bond. D.) Litigation bond.

D. A litigation bond will tie up John's assets and restrain him from selling the property during the lawsuit.

The tendency of poorer risks to continue and for better risks to drop or seek coverage elsewhere is called: A.) Guaranteed Insurability B.) Substandard Rating C.) A Pre-existing Condition Clause D.) Adverse Selection

D. Adverse selection is defined as the tendency of poorer risks to seek or continue insurance to a greater extent than normal risks

All of the following are covered under Personal and Advertising Injury coverage except: A.) Invasion of privacy B.) Malicious prosecution C.) False arrest. D.) A newspaper that infringes on a competitor's trademark.

D. All media-related business, such as newspapers, are excluded.

Which of the following explains that any act by an insurance agent it the same as if the insurance company did the act? A.) Representative insurance B.) Fraternal insurer C.) Domestic insurer D.) Law of agency

D. Because of the Law of Agency, the acts of the agent are legally considered to be the acts of the insurance company.

Which of the following is NOT a supplementary payment on a casualty insurance policy? A.) Loss assessment coverage B.) Claims expense C.) Legal fees to defend the insured in the event of a trial D.) Medical expense

D. Supplementary payments do not include medical expenses.

What coverage is needed to the Business Auto Policy if an employer wants to extend coverage to certain individuals while they are driving a vehicle supplied by the employer? A.) Uninsured Auto B.) Drive Other Car C.) Individual Named Insured D.) Coverage can only be given to vehicles named in the policy Declarations

B. An employer can cover employees driving cars not owned by the individual through the "Drive Other Car" endorsement.

Which of the following is excluded under the Homeowners liability coverages? A.) Debris Removal B.) Communicable Diseases C.) Clean-up of pollutants D.) Fire department service charges

B. Communicable diseases are one of the exclusions in homeowners liability.

Groups that exchange insurance on each other are called: A.) Mutual insurers B.) Reciprocal insurers C.) Syndicate insurers D.) Reinsurers

B. Groups that exchange insurance on each other are reciprocal companies

One of Jean's pair of Tiffany lamps is destroyed. Each lamp by itself is $40,000, but the pair is valued at $100,000. Assuming another lamp cannot be found to complete the set, how much will her homeowners policy cover under the Pair and Sets clause? A.) $100,000 B.) $60,000 C.) $7,000 D.) $125,000

B. If a replacement lamp could be found for $40,000, the insurer will do that, restoring the set. Since a replacement cannot be found, the difference in the set's value and the single lamp will be paid-$60,000

Under which of the common law defenses to negligence would an employer NOT be held liable due to the actions of a worker who injures a coworker? A.) Contributory negligence B.) Common law fellow servant rule C.) Vicarious liability D.) Intervening cause

B. If the coworker was injured because of negligence on the part of the other worker, the company cannot be held liable.

Which of the following is NOT covered by the PAP's medical coverage? A.) Jillian twists her ankle while stepping out of the car onto an icy sidewalk. B.) Amanda starts seeing a doctor 15 months after a car accident because of recurring back pain. C.) Noel is hit by a car while jogging. D.) Ray is injured while riding as a passenger in the insured vehicle that is involved in an accident with the other driver at fault.

B. Medical expenses are only covered for up to one year after an accident.

An insurer that can only sell insurance to it's members or their families is a: A.) Mutual insurer B.) Fraternal Benefit Society C.) Domestic insurer D.) Reinsurer

B. Membership in Fraternal Benefit Societies is based on religious, ethnic, or national lines, and insurance is only sold to members or their families.

In crime insurance, an employee who is responsibility for the care of insured property outside the premises is referred to as a: A.) Custodian B.) Messenger C.) Watch person. D.) Guard.

B. Messenger is the term used.

An insurance company which is owned by policyholders is a: A.) Stock insurance company B.) Mutual insurance company C.) Syndicate insurer D.) Fraternal Benefit Society

B. Mutual insurance companies have no capital stock and are owned by policyholders who share profits through dividends and can attend and vote at company meetings.

Covered autos in a PAP include all of the following except: A.) An auto rented while the insured auto is in the shop for repairs. B.) Newly acquired vehicles for the first 45 days after acquisition. C.) A utility trailer owned by the insured. D.) Trucks designed for use on public roads.

B. Newly acquired vehicles are only covered for the first 30 days after acquisition.

Ocean Marine policy losses are settled on which of the following bases? A.) Replacement cost B.) Valued Policy C.) Actual cash value D.) Market value

B. Ocean Marine policies are Values Policies, which means in the event of total loss, the entire face amount of the policy is payable to the insured.

Which of the following liability policies would provide coverage for injuries sustained by a customer during a product demonstration in a store? A.) Product and Completed Operations B.) Premises and Operation C.) Independent Contractors D.) Contractual

B. Premises and Operations protects building owners from legal liability in the event of bodily injury on the insured premises, such as during a product demonstration.

Susan is an agent in a rural area who believes in doing business with those who do business with her. She makes a practice of buying a side of beef from farmers who buy an insurance policy from her. This is an example of: A.) Misrepresentation B.) Rebating C.) Redlining D.) Discrimination

B. Rebating is the reduction in premium charged, or the return of part of the required premium. In Susan's case, she is essentially returning part of the premium when she pays her client for the side of beef.

Insurance is designed to provide protection against which of the following types of risks: A.) Innovative B.) Pure C.) Polictical D.) Speculative

B. Speculative risks are generally not insurable.

In a Claims Made policy, the Midi-Tail period of time the insured has to let the insurer know of any occurrences that happened during the policy period is: A.) Within 60 days of policy termination. B.) Within 180 days of the policy termination. C.) Within 5 years of policy termination. D.) Only during the policy period.

C. For the Mini-tale, the occurrence must be reported within 60 days, and for the Midi-tale, within 5 years.

Which coverage would indemnify the owner of a boat for lost income if the ship sinks while in transit with a load of cargo? A.) Hull insurance B.) Cargo insurance C.) Freight insurance D.) Protection and Indemnity Insruance

C. Freight Insurance compensates the ship owner for the loss of income that would have been earned.

In auto insurance, insurable interest MUST exist at which of the following times? A.) At the time of a quote is requested B.) At each renewal date C.) At the time of loss D.) Whenever an insurance company requests proof of its existence

C. In Property and Casualty insurance, insurable interest must be present at the time of both application and loss.

A garage owner who wants to protect his personal vehicles from damage needs to have: A.) Garage liability. B.) Garage keeper's coverage. C.) Physical damage coverage. D.) Motor carrier coverage.

C. The garageowner's personal cars cannot be covered by a commercial auto policy.

Frank sold his car to Jill but did not cancel his auto insurance policy. Jill had an accident one month later and Frank reported the accident to his insurance company. Frank was not able to collect money for damages to the car, even though his policy was still in force because: A.) Frank no longer had insurable interest. B.) Frank was not the individual who had the accident. C.) Frank misrepresented that he still owned the vehicle by keeping the policy in force. D.) The insurance company did not follow proper claims procedures.

A. Frank no longer owned the car and so did not have a financial interest in the car.

Which of the following is NOT correct about Fraternal Benefit Societies? A.) They sell insurance to anyone who wants to buy, as long as they are healthy. B.) They have ritualistic forms of work. C.) They have a representative form of government. D.) They are not-for profit organizations.

A. Fraternals offer insurance only to members of their families

HO Policies provides personal liability and bodily injury coverage for: A.) Rented watercraft with less than 50 horsepower. B.) Sailing vessel more than 26 feet. C.) Watercraft with an outboard motor with more than 30 horsepower. D.) None of the above.

A. Homeowner policies cover watercraft with less than 50 horsepower motor rented to you, sailing vessels less than 26 feet owned by you and watercraft with less than 25 horsepower outboard motor owned by you.

Which of the following coverages must be included when liability coverage is written on a Personal Auto Policy> A.) Uninsured Motorist B.) Comprehensive C.) Collision D.) Uninsured Motorist Property Damage

A. In most states, when liability coverage is included on the policy, Uninsured Motorist coverage is also required.

Indemnification is the concept of: A.) Restoring someone to the same financial position he was in before a loss occurred. B.) Identifying a loss as covered in an insurance policy. C.) Restoring someone to the health she enjoyed before an illness. D.) The unpredictability that a loss will occur.

A. Indemnification is the concept of restoring individuals to the same financial position they were at before a loss occurred.

Juan went to a hockey game and was injured by a hockey puck that was hit into the seats. Juan may not be able to sue for damages because of: A.) Assumption of risk B.) Contributory negligence C.) Intervening clause D.) Comparative negligence

A. Juan assumed the risk of flying hockey pucks when he chose to go to the hockey game.

Linda's company Linda's Homemade Shawls had multiple losses occur during the policy period in all of the following cities. In which city will it be covered by her BOP? A.) Chicago B.) Mexico City C.) Paris D.) Tokyo

A. Losses must occur within the U.S. or its territories, Puerto Rico or Canada in order to be covered under the BOP.

Jacob's Messenger Service was transporting securities for deposit at a bank when their truck stopped and the securities taken. Which of the Commercial Crime coverage forms would BEST provide coverage against this situation? A.) Theft, Disappearance or Destruction B.) Off-premises Burglary C.) Premises Theft and Robbery Outside the Premises D.) Extortion

A. Premises Theft and Robbery Outside the Premises does not cover money. Theft, Disappearance or Destruction specifically covers money outside in the custody of a messenger.

ABC Toys makes bicycles for children. Several of its models have been reported to have defective frames and many children have been injured when the wheels fell off the bikes. Which of the following coverages would protect AB from liability lawsuits arising from use of the bikes? A.) Products and Completed Operations B.) Contractual Liability C.) Contingent Liability D.) Premises and Operations

A. Products and Completed Operations covers legal liability arising from defective products, including the bodily injury damage from the bicycles.

An insurer can settle a claim without the insured's permission and signature in all except which of the following? A.) Professional Liability B.) Completed Operations C.) Contractual Liability D.) Premises and Operations

A. Professional liability coverage requires that the insurer obtain the signature of the professional or organization before they can settle out of court.

Which of the following is NOT correct about stock insurance companies? A.) They are owned by policyholders. B.) They are organized under the laws of the state where they are selling insurance. C.) Officers and directors are elected by shareholders. D.) Shareholders share in profits through stock growth.

A. Stock insurers are organized under the laws of the state in which they are incorporated. The company is owned by the shareholders who elect the officers and directors and share in profits through stock growth and dividends.

The principal role of the National Association of Insurance Commissioners is to: A.) Encourage the standardization of insurance laws around the country. B.) Regulate insurance commerce between different states. C.) Create generic insurance policy forms. D.) Determine the fiduciary capacity of insurance agents and companies

A. The NAIC's principal role is to encourage standardization of insurance laws around the country.

Which of the following non-owned vehicles would be covered for liability under a Personal Auto Policy? A.) An auto owned by another family member but operated by the insured B.) An auto owned and operated solely by another family member C.) A company car regularly furnished to the insured D.) A motorcycle owned by another family member but operated by the insured.

A. The PAP covers non-owned, temporary substitute vehicles not normally for use by the insured.

Which clause in the insurance policy explains what happens if the insurer and the insured disagree on a claim settlement amount? A.) Arbitration clause B.) Subrogation clause C.) Assignment clause D.) Cancellation clause

A. The arbitration clause defines what the insurer and insured do if they disagree on a settlement amount, which involves selecting separate appraisers to determine the value.

An agent's ability to solicit insurance applications and accept premiums is an example of: A.) Express directive B.) Implied directive C.) Apparent directive D.) Sales directive

A. The express directive given to an agent by the insurer is authority expressly given the agent in his or her contract.

The role of the state insurance commissioners consists of all of the following EXCEPT: A.) Determining the types of insurance policies that can be sold in their state. B.) Pass legislation regarding insurance business in their state C.) Determining the amount of surplus that insurers must maintain D.) Investing complaints against agents and insurance companies

B. State commissioners can enforce legislation and enact procedure that allow the administration of insurance business, but only the legislative body of state may pass laws to regulate the insurance industry.

A performance bond is an example of which of the following types of bond? A.) Fidelity B.) Surety C.) Repletion D.) Judicial

B. Surety bonds provide for monetary compensation should there be a failure to perform specified acts. Performance bonds guarantee the contractor will perform a job on time.

The Control or Property condition means that coverage will be affected by: A.) The insured violating contract conditions at one locations B.) The applicant's concealment of information from the insurer C.) A negligent act of someone beyond the insured's control D.) Both B and C

B. The Control of Property condition covers negligent acts beyond the insured's control and violations at another location, but an applicant's concealment of information from the insurance company could affect the insurer's decision whether or not to insure the property.

How high is the Fire-Legal Liability limit under the BOP Section II? A.) $160,000 B.) $50,000 C.) $25,000 D.) $100,000

B. The Fire-Legal Liability limit is $50,000.

Gus works at the local port and loads ocean freighters. Under which of the following would he be covered if injured on the job? A.) Worker's Compensation B.) The U.S. Longshoremen and Harbor Worker's Compensation Act C.) The Jones Act D.) His employer's Commercial Casualty policy

B. The U.S. Longshoremen and Harbor Worker's Compensation Act covers workers such as Gus who load ocean freighters.

Q Company has a Bodily Injury/Property Damage policy with a per occurrence liability limit of $200,000 and an aggregate liability limit of $1 million. If Q Company's policy pays $150,000 for a lawsuit in the first month of the policy, how much coverage does Q Company have available to cover a possible second occurrence? A.) $50,000 B.) $200,000 C.) $800,000 D.) $1 Million

B. The per occurrence limit will be paid for each claim until the aggregate limit is reached. Until Company Q has reached their aggregate limit of $1 million, they will receive up to $200,000 for each claim.

Which clause in the insurance policy explains the insurer's right to sue a liable third part for damages after the insurer has paid out on a claim? A.) Arbitration clause B.) Subrogation clause C.) Assignment clause D.) Cancellation clause

B. The subrogation clause outlines the insurer's right to sue a liable third part for damage.

A Commercial Umbrella policy may cover losses that are excluded by the primary policy when the losses exceed: A.) Co-insurance. B.) Self-insured retention. C.) Pro rate liability D.) Contribution by equal shares.

B. Umbrella liability coverage is for businesses with higher than normal liability exposure due to the type of business or because some coverages they require are not covered under other insurance. The umbrella policy extends extra liability coverage over the amount on the underlying coverage over the amount on the underlying policy.

To receive coverage for bodily injured resulting from an accident with a stolen vehicle, an individual should purchase which of the following coverages? A.) Medical Payments B.) Uninsured Motorists C.) Bodily Injury Liability D.) Property Damage Liability

B. Uninsured Motorist covers BI sustained by the insured by accident caused by operator of an uninsured motor vehicle, and because the thief does not have permission to drive the stolen vehicle, they are not insured.

K is injured in an accident with an at-fault driver who has insufficient automobile liability limits to satisfy the judgment against the driver. In this situation, K may seek recovery under which of the following coverages of K's Personal Auto Policy? A.) Uninsured Motorists B.) Underinsured Motorists C.) Bodily injured Liability D.) Medical Payments

B. Uninsured motorists coverage pays for the amount in excess of liability coverage provided in the at-fault driver's policy.

Paul owns a 24-foot yacht and wants to protect it from physical damage as well as from liability that might arise from its use. Which policy would Paul be BEST advised to buy? A.) Outboard Motor and Boat Insurance B.) Watercraft Package Policy C.) Personal Yacht Insurance D.) Homeowners Insurance

B. Watercraft Package Policies cover both liability and property damage. Paul's yacht could be covered because it is less than 30 feet.

All of the following risks are insurable EXCEPT those that are: A.) Measurable B.) Predictable C.) Speculative D.) Selected from a divers, randomly selected pool of risks

C. A speculative risk (such as gambling) does not offer any certainty as to whether the final outcome will be a gain or a loss. Speculative risks are generally not insurable

To guarantee that a contractor will enter into a contract if it is awarded to him a developer should require the contractor to submit a: A.) Fidelity bond. B.) Contract bond. C.) Bid bond. D.) Performance bond.

C. Bid Bonds guarantee that a contractor will enter into a contract if it is awarded to him.

Which of the following agreements would be covered by Contractual Liability coverage? A.) An agreement by a plumber to guarantee the quality of work performed for a customer B.) A verbal agreement by a salesperson to provide liability coverage for the manufacturer of a product C.) A written agreement by a contractor to assume the liability for someone else. D.) An agreement by a manufacturer to assume liability for a loss that has already occurred.

C. Contractual Liability is liability assumed under any written or verbal contract or agreement. A and B are liabilities required by law and so are not contractual

Supplementary payments on a PAP include: A.) Liability expenses paid out as the result of an at fault accident. B.) $250 per day toward lost wages if the insured needs to attend a hearing at the insurer's request. C.) Interest on judgments against insured, but only up to the liability limits of the policy. D.) A $400 Bail Bond required as the result of a DUI ticket

C. It cannot be B or D because supplementary payments on a PAP only pay $100 per day of lost wages and up to $250 for bail bonds. A, liability payments, are not supplementary, they are primary.

The Medical Payments section of a Commercial General Liability policy covers all of the following expenses except: A.) Funeral expenses for a customer fatally injured in an accident on an insured grocer's premises B.) Medical expenses incurred by a customer resulting from an insured shopping mall's business operations C.) Medical expenses incurred by a patient resulting from an insured physician's malpractice D.) Medical expenses incurred by a client injured in an insured attorney's office

C. Malpractice is covered by the physician's Errors and Omissions insurance.

A primary purpose of Premium Fund Trust Accounts is to: A.) Allow agents to maintain only one account for both business operations and premium monies. B.) Allow quicker claim payment by requiring agents to write claims out of their PFTA and then be reimbursed by the insurer. C.) Require the agent to maintain separate accounts for business expenses and premium monies D.) None of the above

C. Many states require a producer to maintain a Premium Fund Trust Account (PFTA) if they hold premium money for any length of time before giving it to the insurer, and the PFTA must be separate from personal or other business accounts.

An insurance company which shares dividends with policyholders is called a: A.) Syndicate insurer B.) Stock insurer C.) Mutual insurer D.) Miracle

C. Mutual insurers are owned by policyholders who share profits through dividends

Part B of a Worker's Compensation policy includes which of the following coverages? A.) Premises Liability coverage B.) No fault coverage for employees C.) Employers Liability coverage D.) Unlimited medical coverage for employees

C. Part B is Employer's Liability coverage. This section insures employers for liability towards employees that is not covered by the statutory Workers' Compensation provisions of the state

A Premises Burglary form would cover losses incurred in which of the following situations? A.) An employee steals money from a company's petty cash drawer. B.) Armed robbers hold up a company's cashier and steal money and securities. C.) An unknown person breaks into the stockroom of a department store and steals merchandise while the store is open for business. D.) A thief hides in a warehouse until after closing, steals inventory, and then breaks out of the premises.

C. Premises burglary covers property other than money and securities, so it would not cover the other options.

Products and Completed Operations Liability coverage applies to which of the following products? A.) Completed products that are still in the insured's possession B.) Products in the process of being completed by the insured C.) Products that have been sold by the insured D.) Products that the insured has contracted to purchase

C. Products and Completed Operations Liability covers legal liability arising from completed, defective products.

A beautician fails to make a patch test before coloring a customer's hair. The customer experiences an allergic reaction to the coloring agent and requires medical treatment. In this situation, which of the following beautician's coverages would apply? A.) Premises and Operations Liability B.) Products and Completed Operations Liability C.) Professional Liability D.) Personal Injury Liability

C. Professional Liability protects professionals from liability caused by a professional mistake, such as not making a patch test.

Damages awarded by a court that are intended to punish the offending party for extreme negligence are called: A.) Specific damages B.) General damages C.) Punitive damages D.) Gross damages

C. Punitive damages are a punishment for extreme or gross negligence by the liable party.

The refusal of an insurer to insure individuals in a certain part of town because of a non-actuarial belief that that part of town is a bad insurance risk is: A.) Misrepresentation B.) Rebating C.) Redlining. D.) Discrimination.

C. Redlining is the refusal of an insurer to underwrite in certain geographic areas, or increasing rates to an unreasonable amount to discourage customers, in order to avoid perceived risks.

Which of the following is not excluded from coverage under Sean's Personal Auto Policy? A.) A personal auto used by Sean, who is an FBI agent, in pursuit of a criminal suspect B.) A personal auto used by Sean's son in delivering pizzas C.) A pickup truck used by Sean on the weekend to haul dirt to his home D.) A personal auto used by Sean's secretary while running errands

C. Sean's auto must be covered by commercial auto coverage during the other three cases involving businesses or employees (the FBI, the pizza company, and the secretary).

Which of the following is an example of a surplus lines insurer? A.) A company organized in a different state, but which sells a life insurance policy sold by other companies as well. B.) A company that offers insurance not offered by admitted insurers. C.) A non-admitted insurer that offers insurance at half the price that admitted insurers offer it. D.) An insurer organized under the laws of a state other than the one in which it is doing business.

C. Surplus/Excess Lines Insurers offer insurance not offered through admitted insurers

The section of the policy that explains reductions in coverage is called the: A.) Declarations B.) Insuring Agreement C.) Exclusions and Endorsements D.) Conditions

C. The Exclusions and Endorsements are where the reductions in coverage in a policy are placed

The BOP will not cover which of the following businesses: A.) Williams and Sons Dry Cleaners B.) T&G Convenience Store and Gas Pump C.) Rosalie's Sky-High Office Building with 12 stories D.) Cheap and Clean Stay 3 story motel

C. The covered office buildings are no more than six stories tall.

States which themselves offer Workers' Compensation and do not allow private insurers to offer it include all of the following except: A.) North Dakota. B.) Ohio. C.) Utah. D.) Washington.

C. The fourth state which does not allow private insurers is Wyoming, not Utah.

Samuel was driving at night when an oncoming car swerved into his lane. Samuel had time to swerve his car off the road to avoid an accident but froze up and was hit by the other vehicle. The driver of the other vehicle may be able to use which of the following in defense of his position that he was not totally at fault? A.) Assumption of risk B.) Contributory negligence C.) Intervening clause D.) Comparative negligence

D. Both Samuel and the other driver contributed negligence so Comparative Negligence could be used in some way to lessen the damages payable by the other driver.

Maria is taking a three-week vacation in Mexico and wants to extend her auto policy coverage to include coverage while she is in Mexico. Which of the following endorsements would give Maria such coverage? A.) Extended transportation expense coverage B.) Mexico coverage C.) Miscellaneous travel endorsement D.) None of the above

D. Extended transportation expense coverage is for rental cars after an accident. Mexico Coverage only extends policy territory coverage within 25 miles of the border on a trip of 10 days or less. Miscellaneous travel endorsements do not exist.

Which of the following is not a BOP standard form exclusion under BOP Section II? A.) Nuclear hazard B.) Water pipe rupture C.) Failure of computers to recognize a certain date or time D.) Fire

D. Fire is covered up to the $50,000 limit, but all of the others are excluded under the BOP general exclusions.

ABC air wants to cover its aircraft hull for all-risks on the ground, but only certain perils while in flight. Which of the perils below are excluded from coverage under such a policy? A.) Fire B.) Lightning C.) Explosion D.) Crash

D. Hull insurance excludes crash and collision when limited for in flight.

Liability coverage is excluded under a PAP for all of the following except: A.) Using a personal auto policy as a for hire taxi. B.) Failing to try to stop another driver of the vehicle from intentionally driving the car up onto a sidewalk. C.) Borrowing a neighbor's car without the neighbors permission to rush to the hospital. D.) Allowing a nanny to drive the children to the zoo.

D. In A, the auto becomes a commercial auto; B involves negligent behavior; C involves theft. In D, the nanny is covered because someone else is covered when they drive a car with the owner's permission.

The concept of restoring individuals to the same financial position they were in before a loss occurred is called: A.) Insurance B.) Reimbursement C.) Restoration D.) Indemnification

D. Indemnification is the concept of restoring individuals to the same financial position they were at before a loss occurred.

The concept of indemnity is best illustrated by: A.) Applying a deductible to a collision loss. B.) Applying a coinsurance penalty to a loss. C.) Reducing a claim payment due to a depreciation of the damaged property. D.) Replacing a stolen ten-year-old television set with a new one of the same size, make, and model.

D. Indemnity restores someone to the same financial position they were in before a loss occurred. If the 10 year-old television were replaced with a brand new flat screen, 50 inch television, it would exceed the financial position they were in before.

Independent Contractors Liability coverage will pay for which of the following occurrences? A.) Injury to a contractor's employee B.) Damage to an insured's property C.) Construction delay caused by design changes D.) Injury to the public caused by a subcontractor

D. Independent Contractors Liability also covers subcontractors.

Aaron repairs railroad tracks for a living. Which of the following would cover Aaron for injuries suffered on the job? A.) Workers' Compensation B.) The U.S. Longshoremen and Harbor Workers' Compensation Act C.) OSHA D.) FELA

D. Interstate railroad workers are covered by FELA/the Federal Employers Liability Act.

What is the limit of liability for the loss of use coverage on Kayla's house? A.) Payment for psychological treatment for Kayla because of the stress the repairs caused her. B.) Half of the increase in living expenses during the repairs. C.) Payment for work missed while Kayla is supervising the work done. D.) Any increase in living expenses so Kayla's household can maintain their normal standard of living during the repairs.

D. Loss of use covers only necessary increases in living expenses so Kayla's household can maintain its normal standard of living-payment will be for the shortest time required to repair the damage.

Insurers in which membership is based on religious, ethnic, or national lines is a: A.) Stock insurance company B.) Mutual insurance company C.) Syndicate insurer D.) Fraternal Benefit Society

D. Membership in fraternal benefit societies is based on religious, ethnic, or national lines and the societies are noted primarily for social and charitable functions.

Even though Workers' Compensation was required by the state for all restaurant employees, M&N Café did not purchase a Workers' Compensation policy before it opened for business. An employee was injured the first day while standing on a chair to reach something on the top shelf of the freezer. Which of the following defenses could M&N use to help decrease damages a court might award the employee? A.) Contributory negligence B.) Comparative negligence C.) Assumption of risk D.) None of the above

D. None of these defenses can be used, because it was required by law for the employer to cover employees with Workers' Compensation insurance.

Kerry keeps precious stones in a sage in her jewelry store. She came in to find the safe had been jimmied and the stones were gone. Which Commercial Crime coverage would indemnify Kerry against such a loss? A.) Employee Dishonesty B.) Theft Disappearance or Destruction C.) Premises Theft and Robbery Outside the Premises D.) Premises Burglary.

D. Premises Burglary covers property other than money and securities, which includes Kerry's precious stones, and also damages to the insured's property, which includes the jimmied safe.

Insurance companies that insure other insurers against catastrophic losses are called: A.) Mutual insurers B.) Reciprocal insurers C.) Syndicate insurers D.) Reinsurers

D. Reinsurers insure other insurance companies against catastrophic loses

In a Commercial Crime policy, non-negotiable insturments that represent money are called: A.) Money B.) Stocks. C.) Promissory notes. D.) Securities.

D. Securities are defined as both negotiable and non-negotiable instruments representing money in Commercial Crime policies.

The ABC Corporation hires the Smiths Construction Company to build an addition to ABC's corporate headquarters. To ensure that it has liability coverage for the acts of the construction company, ABC should purchase which of the following policies? A.) Workers' Compensation B.) Products & Completed Operations Liability C.) Commercial General Liability D.) Owners & Contractors Protective Liability

D. The contractor, Smith, has a policy showing that he alone is responsible for the work on the addition. Owners and Contractors Protective Liability if for construction contracts where the person contracting with the contractor may incur indirect liability due to acts of the contractor.

Kyle's antique clock collection was stolen and he thinks his brother Cal may be involved in the theft. Which of the following actions does Kyle NOT need to take in regard to filing an insurance claim? A.) He needs to notify the police, even if it might lead to Cal's arrest. B.) He must give the insurer a detailed list of the clocks that were stolen. C.) He needs to cooperate with the investigation. D.) He needs to get several estimates from the antique dealers before the insurer can begin settling the claim.

D. The duties of the insured do not include getting multiple estimates.

Premiums for Carl's BOP policy will be based on which of the following? A.) Business location B.) The extent of activity offsite C.) Fire hazards D.) All of the above

D. The premiums will be based on business location, the extent of activity off site, fire hazards, and other items.

Which of the following would provide coverage only in the event that an insured vehicle is damaged by the driver of another car who does not himself have insurance? A.) Uninsured Motorist B.) Comprehensive C.) Collision D.) Uninsured Motorist Property Damage

D. Uninsured Motorist only covers bodily injury, but Uninsured Motorist Property Damage will cover damage to the auto of the insured.

Under the BOP Section III, standard form covered losses do not include: A.) Windstorm B.) Riots C.) Volcanic action D.) War

D. War is a standard form exclusion.

Which of the following incidents would be covered under the Collision coverage of a PAP? A.) A rock hits the window of an insured's auto B.) A tree falls onto the insured's parked auto. C.) The insured's auto hits a deer. D.) The insured's auto hits a boat trailer.

D.) Only D involves collision with another vehicle.