Certificates of Insurance: Facts and Fallacies => Practice Quiz

All the following statements concerning a COI are true, EXCEPT: a. A COI's primary value is that it is used to provide notice of policy cancellation. b. The aggregate limits shown on a COI may have been impaired by paid claims. c. A check in the AI column does not guarantee that AI status is provided to the extent required by a contract. d. A primary deficiency of a COI is that it does not indicate important policy exclusions.

a. A COI's primary value is that it is used to provide notice of policy cancellation.

If auto insurance information is required for both liability and physical damage on a particular vehicle, which of the following forms should be used? a. ACORD 23 b. ACORD 24 c. ACORD 27 d. ACORD 28

a. ACORD 23

Seaside Condominium Association requires each condominium unit owner to provide evidence that the unit owner's own personal property inside the condominium unit is covered by insurance. Which ACORD COI form would be most appropriate in this situation? a. ACORD 24—Certificate of Property Insurance b. ACORD 25—Certificate of Liability Insurance c. ACORD 27—Evidence of Property Insurance d. ACORD 28—Evidence of Commercial Property Insurance

a. ACORD 24—Certificate of Property Insurance

How should an agent comply with a request that the insured's CGL policy be "primary and noncontributory" to the upstream party's CGL policy? a. By requesting an endorsement to that effect b. Change the wording to "primary or noncontributory" c. Do nothing since the downstream party's CGL policy is always primary and noncontributory d. Obtain an excess or umbrella policy

a. By requesting an endorsement to that effect

According to the contract between Howard and Finch, Finch is to be covered as an AI under Howard's CGL policy. What, if anything, should Howard do to comply with this requirement? a. Have Howard's CGL policy endorsed to include Finch as an AI b. Have Howard's insurance agent issue an ACORD 25 form describing its CGL policy and indicating that Finch is an AI c. Make no change to Howard's CGL but obtain a COI indicating that Finch is an AI under that policy d. Nothing because Howard's standard CGL automatically provides AI status when an "insured contract" is involved

a. Have Howard's CGL policy endorsed to include Finch as an AI

Navarro has asked Selena, his insurance agent, to furnish a certificate of liability insurance showing that a series of listed entities "are additional insureds as per the construction contract." From an E&O standpoint, what is the best thing for Selena to do when completing an ACORD 25 form? a. Include no explanatory verbiage regarding AI status but attach a copy of the AI endorsement b. Include the exact verbiage requested by the insured c. Include verbiage stating that these entities are AIs as per the insurance contract d. Include verbiage stating that these entities are AIs as per both the construction contract and the insurance contract

a. Include no explanatory verbiage regarding AI status but attach a copy of the AI endorsement

If an agent refuses to comply with a general contractor's certificate demand for a subcontractor, possible repercussions include all the following, EXCEPT: a. The agent will be charged with fraud. b. The subcontractor is denied the job. c. The subcontractor will move its insurance account to another agent. d. The subcontractor's payment is withheld until a compliant certificate is issued.

a. The agent will be charged with fraud.

River Bank, which holds the mortgage on Adele's building, insists on a building insurance limit greater than the replacement cost of Adele's building. Adele's insurance the agent should refuse this request if any of the following are true, EXCEPT: a. The lender provides a professional appraisal stating the property's current market value. b. The insurer will not pay a limit in excess of the replacement cost. c. The underwriter refuses to "overinsure" the property. d. There is a law prohibiting such requests.

a. The lender provides a professional appraisal stating the property's current market value.

Providing both contractual liability coverage and AI status is referred to as a. a "belt and suspenders" approach. b. a "comprehensive" approach. c. an "all risks" approach. d. an "analytical" approach.

a. a "belt and suspenders" approach.

The use of online certificate systems by agents is a. a business decision. b. a good idea since it reduces their E&O exposure. c. required by law in some legal jurisdictions. d. sometimes mandated by insurer underwriters.

a. a business decision.

Next to an insured, the most likely source of a COI-related E&O claim is a. a certificate holder. b. an insurer. c. the state attorney general. d. the state insurance department.

a. a certificate holder.

Dickson's contracts with downstream contractors include provisions that some downstream contractors' insurers might consider unreasonable, in which case Dickson might or might not agree to a compromise. Requests of this type include all of the following, EXCEPT: a. belt and suspenders approach. b. deal breaker. c. fallback position. d. wish list.

a. belt and suspenders approach.

Latisha has found that the annual costs to her insurance agency of issuing certificates for the Gamble account exceed the revenues generated in commissions on that account. In response to this analysis, Latisha might decide to a. charge a fee if permitted by law or let the customer go. b. charge an additional premium to the insured for the difference. c. charge an additional premium to the insured for the difference plus a small profit. d. declare bankruptcy.

a. charge a fee if permitted by law or let the customer go.

Dickson, a contractor, is expected to sign a contract containing a provision that begins as follows: "To the fullest extent permitted by applicable law, Contactor (Dickson) shall insure and defend, indemnify, and hold harmless Owner...." This contractual provision is a(n) a. combined insurance and indemnification provision. b. disclaimer. c. separate indemnification provision. d. separate insurance provision.

a. combined insurance and indemnification provision.

An ACORD certificate would be considered a(n) a. industry standard certificate. b. manuscript certificate. c. modified standard certificate. d. proprietary certificate.

a. industry standard certificate.

The Description of Operations field in an ACORD 25 form can include any of the following, EXCEPT: a. information concerning the insurance agent's E&O policy limits. b. information that does not misrepresent policy coverages, limits, and terms. c. information that does not violate laws, regulations, or regulatory directives. d. information that is not a violation of the agency/company agreement.

a. information concerning the insurance agent's E&O policy limits.

ISO is best known for promulgating standardized a. policy forms. b. processing forms. c. certificate forms. d. model insurance regulations.

a. policy forms.

According to the ACORD 25 form, notice of cancellation to the certificate holder is provided only if a. such notice is in accordance with policy provisions. b. the certificate holder has paid a fee for this service. c. the certificate holder is an AI. d. the certificate holder is required to receive notice in a construction contract.

a. such notice is in accordance with policy provisions.

When was ACORD formed? a. 1953 b. 1970 c. 1986 d. 2000

b. 1970

Which of the following is a benefit of a COI? a. A COI is evidence that an upstream party should be assessed a premium charge for a downstream party. b. A COI is evidence that the upstream party is enforcing a contractual insurance requirement. c. A COI disclaimer exists mainly to protect the certificate holder. d. A COI can be used to provide AI status to a certificate holder.

b. A COI is evidence that the upstream party is enforcing a contractual insurance requirement.

What form is most often used to certify commercial liability insurance? a. ACORD 24 b. ACORD 25 c. ACORD 27 d. ACORD 28

b. ACORD 25

In the ACORD 25 form, under Types of Insurance, which of the following two items are indicated by placing a checkmark in the columns? a. AI status and supplementary payments b. AI status and waivers of subrogation c. Cancellation and supplementary payments d. Supplementary payments and waivers of subrogation

b. AI status and waivers of subrogation

Which form of indemnification is most often prohibited by anti-indemnity laws? a. "All risks" form b. Broad form c. Intermediate form d. Limited form

b. Broad form

Because Blanchard Insurance Agency insures many contractors, the agency is frequently asked to review construction contracts and affirm that the contractor's insurance complies with the contract's provisions. Blanchard sometimes recommends that the contractor have its own legal counsel review contracts and determine what insurance is necessary, but most contractors do not consider this a practical approach. Which of the following approaches Blanchard might take is probably the most practical? a. Add an attorney to Blanchard's staff with the sole responsibility of reviewing clients' contracts b. Have trained staff review contracts and make it clear to clients that the agency is only reviewing insurance requirements, not providing legal advice c. Refuse to provide this service d. Review contracts as requested and accept the related business risk (E&O exposure)

b. Have trained staff review contracts and make it clear to clients that the agency is only reviewing insurance requirements, not providing legal advice

Cherie is renting storefront premises from McLeod. Who is in the best position to determine if Cherie's insurance program complies with contractual insurance requirements in the lease? a. Cherie's insurance agent b. McLeod, who drafted the contract c. McLeod's insurance agent d. The state insurance department

b. McLeod, who drafted the contract

Soon after the Strickland Insurance Agency issued an ACORD 25 Certificate of Liability Insurance to Zamora, the insured canceled the policy described in the certificate. What should the Strickland Insurance Agency do to minimize the likelihood of an E&O claim? a. Immediately notify Zamora of the cancelation b. Nothing c. Notify the insurer that an ACORD 25 Certificate of Liability Insurance had been issued to Zamora d. Send Zamora an ACORD 32 Notice of Insurance Cancellation form

b. Nothing

Why should a construction contract not require a downstream party to provide a CGL policy with a "broad form property damage (BFPD) endorsement"? a. The BFPD endorsement form is used only to insure leased property. b. The BFPD endorsement is an antiquated policy form endorsement no longer found in the standard marketplace. c. The policy form BFPD endorsement is too expensive. d. The BFPD endorsement is used only with commercial property policy forms.

b. The BFPD endorsement is an antiquated policy form endorsement no longer found in the standard marketplace.

COIs a. are not subject to exclusions in the listed policies. b. are issued for general informational purposes only. c. confer contractual rights to the requestor. d. provide information that remains unchanged until insurance policy expiration.

b. are issued for general informational purposes only.

All ACORD COI forms include a. a policy termination notice. b. disclaimers. c. exclusions. d. permission to modify.

b. disclaimers.

To trigger AI coverage under "blanket" or "automatic" AI endorsements, the contract requiring AI status usually must be a. filed with the state insurance department. b. in writing. c. notarized. d. signed by a licensed attorney.

b. in writing.

Sending copies of AI endorsements or other policy forms to AIs is a good idea because a. almost all AI endorsements require it as a condition to trigger AI status. b. it may reduce the agent's E&O exposure. c. state insurance laws require it. d. the courts require it as a condition to trigger AI status.

b. it may reduce the agent's E&O exposure.

Sending copies of certificates to insurers is a good idea because a. it ensures the solvency of the US Postal Service. b. it may reduce the agent's E&O exposure. c. state insurance laws require it. d. underwriters almost always insist on copies.

b. it may reduce the agent's E&O exposure.

A certificate negotiated between two entities from scratch would likely be considered a(n) a. industry-standard certificate. b. manuscript certificate. c. modified standard certificate. d. proprietary certificate.

b. manuscript certificate.

A document often posted on an entity's website with basic information about their insurance program but without mention of a certificate holder, additional insured, or issuing agent is usually referred to as a a. manuscript certificate. b. memorandum of insurance. c. modified standard certificate. d. proprietary certificate.

b. memorandum of insurance.

Gilmore, a general contractor, can insure its liability exposure for the actions of a subcontractor in all of the following ways, EXCEPT: a. being named as an AI on the subcontractor's CGL policy. b. purchasing a COI. c. relying on its own CGL policy. d. requiring the subcontractor to furnish an OCP policy for the general contractor.

b. purchasing a COI.

ACORD is an acronym for what currently named organization? a. Agent Certification and Organization for Research and Development b. Agent Company Operations Research and Development c. Association for Cooperative Operations Research and Development d. American Cooperative Operational Research Department

c. Association for Cooperative Operations Research and Development

In the ACORD 25's current Description of Operations field, what three types of information can be included, according to the ACORD Forms Instruction Guide? a. Locations, vehicles, and exclusions b. Operations, locations, and exclusions c. Operations, locations, and vehicles d. Operations, restrictions, and exclusions

c. Operations, locations, and vehicles

What part of a COI confirms that the certificate does not amend, extend, or alter the terms of an insurance policy? a. The certificate holder b. The co-signer c. The disclaimers d. The preamble

c. The disclaimers

Another name for promissory estoppel is a. cancellation with cause. b. contractual risk transfer. c. detrimental reliance. d. named exclusion.

c. detrimental reliance.

A certificate with the statement "This certificate does not affirmatively or negatively amend, extend or alter the coverage afforded by the policies below except as stated below" would most likely be considered a(n) a. industry-standard certificate. b. manuscript certificate. c. modified standard certificate. d. proprietary certificate.

c. modified standard certificate.

Nikki has been asked to provide a COI indicating that the certificate holder will receive 30 days' advance notice of any cancellation, nonrenewal, or material change in the policy's coverage. If she adheres to the recommendation of E&O experts, Nikki will a. agree to provide no more than 10 days' advance notice. b. comply with the certificate holder's reasonable request. c. refuse to provide such notice. d. verify the referenced policy's notification provisions before agreeing to include this information in the certificate.

c. refuse to provide such notice.

The ACORD FIG for each ACORD form should be incorporated into or referenced by a. directives and bulletins from the state insurance department. b. state insurance laws or regulations. c. the agency procedures manual. d. the insurance policy shown on the form.

c. the agency procedures manual.

The limits shown on a COI should be a. the limits requested by the insured. b. the limits required by a construction contract. c. the limits shown on the policy declarations page. d. the remaining aggregate limit if there are paid claims.

c. the limits shown on the policy declarations page.

All of the following organizations were instrumental in the introduction of standardized certificates and/or policy forms, EXCEPT: a. ACORD. b. ISO. c. IIABA. d. NAIC.

d. NAIC.

A certification statement on the ACORD 25 cautions that aggregate limits may have been reduced by what? a. Bankruptcy of the named insured b. Cancellation notice c. Contractual risk transfer d. Paid claims

d. Paid claims

Which of the following is a true statement about COIs prior to the formation of ACORD? a. All pre-ACORD certificates included notice of cancellation. b. No pre-ACORD certificates had disclaimers. c. All pre-ACORD certificates could amend, extend, or alter the terms of the listed policies. d. There was nothing consistent about the information on pre-ACORD certificates.

d. There was nothing consistent about the information on pre-ACORD certificates.

If a policy has not yet been issued, evidence of coverage should be provided by issuing a. an ACORD 25-Evidence of Liability Insurance. b. an ACORD 26-Policy Certification Log. c. an ACORD 27-Evidence of Property Insurance. d. an ACORD 75-Insurance Binder.

d. an ACORD 75-Insurance Binder.

Certificate-related E&O claims have increased for all the following reasons, EXCEPT: a. inadequate education of both COI requestors and agents. b. increased complexity in the demand for certificates. c. increased demand for certificates. d. increased training for insurance agency staff.

d. increased training for insurance agency staff.

COIs are commonly issued to inform the requestor about basic insurance policy coverages and terms under all the following kinds of contracts, except a. construction and service contracts. b. leases. c. loan documents. d. prenuptial agreements.

d. prenuptial agreements.

A certificate required by a large multinational corporation that resembled an ACORD certificate but with significant modifications would likely be considered a(n) a. industry-standard certificate. b. manuscript certificate. c. modified standard certificate. d. proprietary certificate.

d. proprietary certificate.