Exam

What is the Part D limit of liability for damage to a non-owned trailer under the Personal Auto policy? $1,500. $500. $1,000. $2,000.

$1,500. Explanation: The limit is $1,500 for damage to a non-owned trailer that is designed to be pulled by a private passenger auto, pickup truck or van.

Which of the following is not eligible for coverage under any of the Homeowners forms? A tenant living in an apartment building. A condominium unit-owner. A residence on a farm. A mobile home used as a permanent residence.

A residence on a farm. Explanation: Farm dwellings and personal property are not eligible for coverage under a Homeowners form. Separate Farm insurance coverage is available.

Which of the following Commercial Inland Marine coverage forms covers payments that are due to the insured from customers when these payments cannot be collected due to loss or damage of records? Accounts Receivable Equipment Dealers Electronic Data Processing Valuable Papers and Records

Accounts Receivable. Explanation: The purpose of accounts receivable coverage is to protect the insured when their records have been destroyed or damaged by a peril insured against. It pays to reconstruct the records and it also pays for the losses sustained by the insured due to the destruction of the accounts receivable records.

The perils most frequently covered by a Difference in Conditions policy are: Answer Choices: Select the Correct Answer Flood and volcanic eruption. Earthquake and volcanic eruption. Earthquake and flood. Collapse and flood.

Earthquake and flood. Explanation: Earthquake and flood coverage is almost always excluded under property policies, therefore these two coverages are the most frequently written DIC policies or endorsements.

When a liability policy is contested, which of the following entities ultimately determines legal liability? I. The insurance company. II. A court of law. III. The claimant. I or II I only II only III only

II only. Explanation: In cases of litigation it is the court/jury/judge that determines legal liability.

Which of the following is the first duty of the insured after suffering a property loss? Take steps to protect the property from further loss. Have the damaged property appraised. Hire an outside claims adjuster. Increase his coverage.

Take steps to protect the property from further loss. Explanation: The insured is required to protect the property from further loss. The insurance company will pay all reasonable costs involved in protecting the property from further loss or damage.

Cameron has his home covered under a Homeowners policy and his limit for bodily injury is $100,000. He also purchased a Personal Umbrella policy with a $1,000,000 limit of liability. Cameron is sued and a judgement was made against him for $500,000. To trigger his Umbrella policy, his Homeowners policy must pay $100,000, but he finds that the insurance company from which he purchased his Homeowners policy has become insolvent. How will the Umbrella insurer pay the claim (disregarding any retention limit)? The Umbrella policy will become primary when the underlying insurer becomes insolvent, and will pay the $100,000, plus the remaining $400,000 due under the Umbrella policy. The Umbrella policy will pay nothing. The underlying insurance must be kept in place for the Umbrella policy to pay any amount. The Umbrella policy will not become primary when the insurer carrying the underlying insurance becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability. The Umbrella policy will become primary when the underlying insurer becomes insolvent, but will only pay the underlying policies limit of $100,000, and only $300,000 of the remaining judgement, for a total of $400,000.

The Umbrella policy will not become primary when the insurer carrying the underlying insurance becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability. Explanation: The Umbrella policy will not replace the underlying insurance when that insurer becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability.

Jeff has his 1974 Pontiac Firebird Trans-Am SD-455 covered under a standardized personal automobile policy. He has had a full restoration done to both the interior and exterior of his muscle car and he can't wait to show it off. When Jeff's buddy Dale sees the car, he challenges Jeff to race against him in his 1971 Chevy Camaro SS350. Jeff accepts the challenge and the two men set a date for the following week. The following week, many people find out about the race and come out to watch on race day. Shortly after the race begins, Jeff loses control of his car when a tire blows out and he swerves into the crowd of people watching the race, injuring several. He is sued for bodily injury. Which of the following statements best describes how Part A of Jeff's personal auto policy will cover the costs to defend the claims against Jeff? The insurer will not defend against the claim because it is not covered under the policy. The insurer will defend against the claim, but only until the limit of Part A is exhausted. The insurer will pay defense costs until the claim is settled or a judgment has been rendered by the court. The insurer will not defend against the claim because restored automobiles cannot be covered by a standard Personal Auto policy.

The insurer will not defend against the claim because it is not covered under the policy. Explanation: Part A - Liability excludes coverage for vehicles used in prearranged racing or speed contests, and the insurer has no duty to defend or settle claims for bodily injury or property damage that are not covered under the policy.

Manny is purchasing a Commercial Property policy with a Business Income form included. Manny can select from any of the following as a method to provide coverage, while avoiding the coinsurance requirement, EXCEPT: The maximum monthly limit of indemnity optional coverage. The maximum period of indemnity. The monthly limit of indemnity. Agreed value.

The maximum monthly limit of indemnity optional coverage. Explanation: The maximum monthly limit of indemnity optional coverage does not exist. The other three answer choices are all methods of coverage under a Business Income form that permits an insured to avoid the coinsurance requirement.

Isaac owns a home with an older furnace in need of repair. He leaves his home for a month to avoid the cold weather. He returns to find that the furnace had stopped working. Water pipes have frozen and burst and his property has been damaged. Since the water ran for almost a month, his water bill is extremely high. What will the adjuster pay? The water damage. The increased cost of the water bill. The cost to replace the particular part in the plumbing system that busted and caused the damage. The furnace repairs and/or replacement.

The water damage. Explanation: One could argue that this was caused by neglect, but the damage cannot be tied to the neglect exclusion. This exclusion applies post-loss and not before a loss has occurred. The company would have to prove intent on the part of the insured to damage his own property. Even if the furnace caused a fire, the company would have to prove an intentional act such as arson. Water is not considered covered property so the value of its loss (the water bill) is not covered.

e-wheeled vehicle? When used in an emergency situation. Never. On the insured's premises. Off-road use.

When used in an emergency situation. Explanation: The PAP policy makes an exception to the "less than four wheel rule". In cases of an emergency this type of a vehicle would be covered for liability coverage.

The additional coverage of the Commercial Property cause of loss forms known as the "Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria" provides: $10,000 for all occurrences within the policy period. $15,000 coverage for all occurrences within a 12-month period. $5,000 coverage for all occurrences within the policy period. $10,000 coverage for all occurrences within a 12-month period.

$15,000 coverage for all occurrences within a 12-month period. Explanation: This additional coverage provides $15,000 coverage for all occurrences within a 12-month period.

The type of auto body frame that is most often used in today's automobile and is a single molded unit, is known as: A universal frame. A subframe. A conventional frame. A unibody frame.

A unibody frame. Explanation: A unibody frame is a single molded unit to which the other structures of the automobile are welded.

With a "full release settlement" of an insurance claim: The claimant does not have to sign a release. The insurer can make payments over 90 days. The insurer has 60 days to make payment. All damages are paid immediately in one lump sum.

All damages are paid immediately in one lump sum. Explanation: A "full release settlement" is also known as a "final release" and all sums due have been paid and the file is closed.

All of the following are true of the liability coverage in a Businessowners policy, EXCEPT: Coverage is provided for products and operations liability. Coverage is provided for both bodily injury and property damage from business operations and premises. Coverage comes with a series of separate aggregate limits. Coverage is provided on a "claims-made" basis.

Coverage is provided on a "claims-made" basis.

Watercraft liability, medical expenses and uninsured boaters are coverages provided under which of the following policies? I. Watercraft. II. Homeowners. III. Mariners. I only I and III only III only I, II, and III

I only. Explanation: Watercraft policies are designed to cover boats used primarily on fresh water streams and lakes. It is a package policy providing several coverages including hull, motor and trailer coverage along with liability coverage.

What is the difference between a Businessowners policy and a Commercial Property policy? I. The Businessowners policy automatically provides earthquake coverage whereas a Commercial Property policy does not. II. The Businessowners policy includes liability coverage, while a Commercial Property policy would not. I only II only Both I and II Neither I nor II

II only. Explanation: The Businessowners coverage form automatically provides property and liability coverage, but a Commercial Property policy does not offer liability coverage. Neither a Businessowners nor a Commercial Property policy would automatically provide earthquake coverage, although endorsements are available to add it.

An insured has taken an inventory of his merchandise and discovers a substantial shortage of valuable stock. He submits a claim to his insurance carrier that provides his coverage under a Businessowners Policy. What coverage is provided by the BOP for the missing inventory? Full replacement cost coverage. Full actual cash value coverage. The loss is paid on an agreed amount basis. No coverage would apply.

No coverage would apply. Explanation: There is no coverage for missing property when there is no physical evidence to show the cause of loss. The only proof of loss is an inventory calculation and that is not enough evidence for coverage to apply under the BOP.

The insured has an occurrence CGL policy with a $600,000 aggregate limit and a $300,000 per occurrence limit. The insured has a claim during the policy term which was settled for $350,000. Another occurrence in the same policy term is settled for $100,000. How much of the aggregate limit will remain for other occurrences in this policy period? $200,000 $50,000 $600,000 $400,000

$200,000 Explanation: The insurer will only pay $300,000 for the first occurrence, because that is the per-occurrence limit. The insurer will pay the full $100,000 for the second occurrence. The total of these two payments is $400,000, which leaves $200,000 of the aggregate limit for other occurrences in this same policy period.

The Commercial Building and Personal Property coverage form provides five extensions of coverage, but only if: An 80% or higher coinsurance percentage is shown on the Declarations page, and the property amount of coverage, based on that percentage, is purchased. The extensions are listed on the Declarations page of the policy, and an additional premium is paid. The coverage for buildings is written on a replacement cost basis. All coverages under the policy are written on a blanket basis.

An 80% or higher coinsurance percentage is shown on the Declarations page, and the property amount of coverage, based on that percentage, is purchased. Explanation: The property must be insured for 80% of its value. The 5 extensions are: newly acquired or constructed property, personal effects and property of others, valuable papers and records, property off premises, and outdoor property.

Which of the following situations would NOT be considered an unfair claim settlement practice according to the NAIC Model Act? Settling a claim for an amount that was less than the insurance advertisement given to the insured indicated at the time of the insurance application. Issuing a denial of claim before conducting a reasonable investigation. Binders Keepers Insurance routinely fails to acknowledge pertinent communications regarding claims within the time frame required by state law. Indemnify Insurance pays thousands of claims per year, but on two of those claims they failed to accept or deny the claim within the time frame required by state law.

Indemnify Insurance pays thousands of claims per year, but on two of those claims they failed to accept or deny the claim within the time frame required by state law. Explanation: The fact that Indemnify Insurance failed to meet the time frame for accepting or denying a claim on two of their claims would not result in a charge of an unfair claim settlement practice. The law states that the violation must be committed with such frequency as to indicate that it is a general business practice.

Universal Foods buys the Chewy Cereal Company. After the purchase is completed, a well known actress sues Universal, claiming that her picture was used without her permission in a Chewy advertisement. The advertisement appeared some time before Universal acquired Chewy. Will Universal's Commercial General Liability policy cover this claim? Yes. It is a claim for invasion of privacy, which is covered as personal injury. No. Personal injury coverage with respect to newly acquired organizations does not apply to offenses committed before the acquisition. Yes. Universal is liable for actions of Chewy before the purchase took effect as they are assuming all obligations of the previous owner. No. There is no personal injury coverage under the policy with respect to newly acquired organizations before or after.

No. Personal injury coverage with respect to newly acquired organizations does not apply to offenses committed before the acquisition. Explanation: The claim is not covered. Personal injury coverage with respect to newly acquired organizations does not apply to offenses committed before the acquisition.

George went out for target practice one day with his handgun. He has practiced many times with the same target located in the woods behind his house. Unbeknownst to George, a neighbor was walking in the woods behind the target one day and was shot in the leg by George. Intentional acts are never covered by insurance, however, the claim filed by the injured neighbor may be covered under George's liability coverage. Which of the following is the most likely reason why? Shooting the gun was an intentional act committed by George, but the neighbor did not assume the risk because he did not know George was shooting that day. Because George's intent is not taken into account when another person is harmed. Shooting the gun was an intentional act committed by George, but the consequences of act (his neighbor being shot) were not intended. Because liability insurance is required to provide a civil remedy to an injured person, no matter if the insured intended to commit the act or not.

Shooting the gun was an intentional act committed by George, but the consequences of act (his neighbor being shot) were not intended. Explanation: Intentional acts may be covered if the consequences of the act was not intended. Shooting the gun was an intentional act committed by George, but the consequences of act (his neighbor being shot) was not intended.

What are the unique features of the ISO standardized Businessowners policy form? The BOP provides "Owned Auto" and "Ocean Marine" coverage. The BOP premium is adjustable, and is based on number of employees in the coverage business. The BOP provides "open peril" coverage for property. The BOP has fewer exclusions than other commercial property policies.

The BOP provides "open peril" coverage for property. Explanation: The BOP is unique in that it includes favorable property insurance provisions, including open peril coverage.

Under the Businessowners policy, for up to how many years can the insurer request to examine the books and records of an insured after the policy has expired? Three years. One year. Two years. Four years.

Three years. Explanation: The insurer has the right to examine the books and records of the insured anytime during the policy period and for up to three years after the policy expires.

Under a Businessowners policy, the "Hired Non-Owned" coverage endorsement would cover: The employer who uses his/her auto for personal use. Vehicles borrowed by the insured. The employee who uses his/her vehicle on personal business. The owner of a hired or non-owned vehicle.

Vehicles borrowed by the insured. Explanation: This endorsement is used with the BOP when the insured does not carry Business Auto coverage. The "Hired Non-Owned" endorsement provides two coverages. The first covers the insured's legal liability for bodily injury or property damage that arises out of the maintenance, or use, of a hired auto by the insured or the insured's employees, in the course of the insured's business. The second purpose of this endorsement is to provide bodily injury or property damage that arises out of the use any non-owned auto in the insured's business by any person. This endorsement would not cover the employee personally when driving their own auto on either company or personal time.

The Business Auto policy defines an "accident" as: A sudden and unforeseen event that results in bodily injury or property damage. A sudden and unforeseen event that includes continuous or repeated exposure to the same conditions that results in bodily injury or property damage. Bodily injury or property damage that was not the result of a deliberate or intended act. Any bodily injury or property damage in which the insured becomes legally liable.

A sudden and unforeseen event that includes continuous or repeated exposure to the same conditions that results in bodily injury or property damage. Explanation: The Business Auto coverage form defines an accident as: "A sudden and unforeseen event that includes continuous or repeated exposure to the same conditions that results in bodily injury or property damage." This is the definition of "occurrence" in most liability policies, but the Business Auto policy creates its own definition of "accident" like most liability policies. It is important for you to understand that if you are asked a "definition" question, you will need to remember the definition from the specific policy type, as they can be different.

A new home owner is being forced into purchasing insurance from a particular insurance company as a condition to receiving a mortgage. The lender is guilty of which of the following unfair trade practices? Coercion.. Explanation: In this situation, the lender is guilty of coercion. Sometimes called "coercion of borrowers". Unfair discrimination. Twisting. Coercion. Rebating.

Coercion. Explanation: In this situation, the lender is guilty of coercion. Sometimes called "coercion of borrowers".

How long does an adjuster's license stay in effect in Rhode Island? Two years. Three years. They are continuous until cancelled, revoked or suspended. Four years.

Four years. Explanation: The Rhode Island Insurance Code states that "no license shall remain in force for a period in excess of four years".

All of the following statements are true regarding the chief administrative officer of a state insurance department, EXCEPT: He/She is either elected or appointed to the office, depending on state law. He/She automatically becomes a member of the NAIC. He/She sets insurance rates within their state. He/She enforces insurance laws and regulations to promote the welfare of the general public.

He/She sets insurance rates within their state. Explanation: The Commissioner/Director/Superintendent of a state insurance department does not set insurance rates, they only approve those rates. The other three answer choices are correct.

Milton agrees to steal and wreck Albert's car for $4,000, so that Albert can collect $8,000 under his auto insurance policy. Which of the elements of a valid contract are missing in this agreement? A valuable consideration. Legal purpose. Competent parties. An offer and an acceptance.

Legal purpose. Explanation: All elements of a valid contract are present except a legal purpose.

A claim is made on an excess liability policy. It is discovered during the claims investigation, that the underlying liability policy and the excess liability policy have different inception and expiration dates. The adjuster finds that the different dates has created a situation where the underlying policy was not in effect at the time of the occurrence, and therefore cannot trigger the excess liability policy to pay the claim. This situation is known as: Contribution by Equal Shares. Nonconcurrency. Liability Discrepancy. Split Limits.

Nonconcurrency. Explanation: "Nonconcurrency" is a situation where an underlying policy and an excess liability policy, have different inception and expiration dates, creating a situation where the underlying policy is not in force to trigger coverage under the excess liability policy.

Underinsured motorist coverage provides first-party protection to an insured after an accident in which of the following situations? The other driver has insufficient liability limits and is "at-fault". The other driver has no insurance and is "at-fault". The other driver has no insurance but is not "at-fault". The insured driver has insufficient liability limits and is "at-fault".

The other driver has insufficient liability limits and is "at-fault". Explanation: The purpose of underinsured motorist coverage is to provide protection for the insured when the "at-fault" driver has insurance, but it is insufficient to cover the injuries to the insured. In this case, the insured may collect the "excess" from their own insurer.