RF 2020 EXAM 1

Which one of the following is a legal term for waiting too long to assert a legal right? a) Estoppel b) Time-barred c) Laches d) Infringement

c) Laches

The risk control technique that reduces the severity of a particular loss is which of the following? a) Avoidance b) Duplication c) Loss reduction d) Loss prevention

c) Loss reduction

Since there is no formal process for creating a trade secret, the risk control measures associated with trade secret loss control focus on maintaining a) Disclosure b) Accountability c) Secrecy d) Legality

c) Secrecy

An organization that operates warehouses in two locations is using the risk control technique of a) Loss prevention b) Diversification c) Separation d) Duplication

c) Separation

A patent issued for an invention or process that has some usefulness, does not have to be marketable, but must work is a a) Process patent b) Plant patent c) Utility patent d) Design patent

c) Utility patent

An excess liability insurance policy that covers a claim in excess of the underlying limits only if the loss is covered by the underlying policy is called a) a layered policy b) an umbrella policy c) a following-form excess policy d) a true excess policy

c) a following-form excess policy

The maximum amount of insurance or limit of liability that a insurer will accept on a loss exposure is called a a) loss limit b) novation c) line d) retrocession

c) line

If a captive insurer is established to provide coverage for loss exposures that the parent company has difficulty insuring privately, how does the captive insurer typically deal with such risks? a) by insuring difficult-to-insure loss exposures of other companies, effectively pooling the exposure b) by capping the liability on a per-loss basis, with the parent company assuming losses above the liability cap c) through purchasing excess of loss reinsurance d) through purchasing proportional reinsurance

c) through purchasing excess of loss reinsurance

Which one of the following statements regarding correlation analysis is true? a) Correlation analysis can indicate causality between variables b) Because it incorporates so much data, a risk professional can rely on correlation analysis only when making a major decision c) The range of correlation coefficients is from 0 to +1 d) Abnormal observations and inaccurate data may skew correlation analysis

d) Abnormal observations and inaccurate data may skew correlation analysis

Among the properties owned by Hagen Company are five buildings constructed from cement blocks. Hagen did not include these buildings for coverage under its property insurance policy because losses to these structures occur so infrequently. When losses do occur, Hagen Company simply pays for the losses through cash flow or current assets. Hagen's method of dealing with losses to these buildings is called a) Self insurance b) Group self insurance c) Third-party administered plan d) Informal retention

d) Informal retention

Olivia is planning a meeting to explain a new cyber security procedure. She expects that the meeting will be impeded by hidden agendas. Which one of the following is the best way for Olivia to deal with potential hidden agendas? a) Olivia should start the meeting by stating that she does not expect everyone to like the new procedure, but they must accept it b) Olivia should hold a separate meeting for those individuals who she suspects have a hidden agenda. c) Olivia should refuse to take questions during her meeting, and request that any questions be forwarded to her in writing after the meeting d) Olivia should start the meeting by asking participants to state their concerns or feeling about the procedure.

d) Olivia should start the meeting by asking participants to state their concerns or feeling about the procedure.

Which one of the following risk control techniques might actually increase loss frequency? a) Loss prevention b) Diversification c) Loss reduction d) Separation

d) Separation

Which of the following companies would be best suited for participating in an insurance pool? a) a large book seller with hundreds of local retail stores interested in insurance for their fleet of vehicles b) a construction company has had good results in a group captive but would like more control over their insurance program c) a multi-state fortune 500 home supply company with adequate liquidity that is seeking workers compensation coverage for its 5,000 employees d) a local school district that is purchasing new buses and looking to reduce its insurance expense by joining a workers' compensation pool

d) a local school district that is purchasing new buses and looking to reduce its insurance expense by joining a workers' compensation pool

Which one of the following types of intellectual property protection automatically applies to any work of expression when it becomes fixed in a tangible medium? a) patent b) trade secret c) trademark d) copyright

d) copyright

An insured has a commercial general liability policy with one insurer and an excess liability policy with another insurer. There are coverage gaps due to the excess policy's independence from the underlying policy for coverage determination. Which one of the following types of excess policy does the insured have? a) specific excess liability policy b) following-form excess liability policy c) aggregate excess liability policy d) self-contained excess liability policy

d) self-contained excess liability policy

Hugh was recently hired as a risk manager for Malvern Manufacturing. He is preparing for his first presentation to the employees working on the manufacturing floor. Hugh realizes that he needs to establish credibility with the audience in order to be persuasive. He decides that he will tell a couple of stories about how he has dealt with similar situations in the past. Which one of the following modes of persuasion is Hugh using? a) Ethos b) Logos c) Pathos d) Axios

a) Ethos

Construction contracts typically holds the a) Landowner harmless for certain construction-related claims b) Eventual tenant of the premises harmless for construction defects c) Contractor harmless for any premises liability claims d) Contractor harmless for any negligence

a) Landowner harmless for certain construction-related claims

The way an organization differentiates its services from its competitors services is a a) Service mark b) Trade dress c) Trademark d) Descriptive mark

a) Service mark

Which one of the following statements is correct regarding characteristics of ideally insurable loss exposures? a) a common function that insurance provides is a spreading of risk across many similar exposure units within the same period b) intertemporal risk transfer, the spreading of risk through time, requires many similar exposure units c) one requirement of the law of large numbers is that past events occur under different circumstances in the future d) loss exposures such as homes and automobiles generally will not meet the ideally insurable requirement that the exposure be of many similar exposure units

a) a common function that insurance provides is a spreading of risk across many similar exposure units within the same period

An exculpatory clause is a) a contractual provision that relieves one party from liability resulting from a negligent or wrongful act b) the intentional relinquishment of a known right c) the surety's right to seek reimbursement from the principal for the surety's payments. d) the substitution of one party for another

a) a contractual provision that relieves one party from liability resulting from a negligent or wrongful act

Commercial general liability insurance policies written on an occurrence basis apply to bodily injury and property damage that occurs during the policy period. This provision supports the principle that insurable loss exposures must ideally be a) definite b) independent c) fortuitous d) pure risks

a) definite

One reason that an organization might choose to protect an invention with a trade secret status rather than with a patent is that a) A trade secret status provides a higher degree of protection than a patent b) A patent requires disclosure of the details of the invention c) Theft of a trade secret is less likely than theft of a patent d) The invention could be easily reproduced through reverse engineering

b) A patent requires disclosure of the details of the invention

Telematics devices allow organizations to accurately identify patterns of risk and predict risk for which one of the following types of loss exposures? a) Workers compensation b) Automobile c) Property d) Business Income

b) Automobile

Which one of the following statements regarding reinsurance is true? a) Reinsurance transfers the obligations that a primary insurer has to its insured to the reinsurer b) Reinsurance agreements typically require the primary company to retain part of its original liability c) The ceding company is the insurer that agrees to indemnify another insurer in case of loss d) Once risk is transferred to a reinsurer, the reinsurer cannot transfer the risk to another reinsurer

b) Reinsurance agreements typically require the primary company to retain part of its original liability

A retrospective rating plan a) is a form of self-insurance b) is insurance that is subject to a rating formula c) is considered to be guaranteed-cost insurance d) bases pricing on past loss experience

b) is insurance that is subject to a rating formula

Weldon Company has a fleet of tank trucks. Oil companies and service stations hire Weldon trucks to transport oil, gas, and diesel fuel. Because of difficulty in obtaining affordable insurance for environmental impairment liability, truckers liability and physical damage, and workers compensation, Weldon formed its own insurance subsidiary. The Vermont-based subsidiary collects premiums, issues policies, and pays Weldon's covered liability claims. The organization that Weldon Company formed is called a a) Protected cell company b) Risk retention group c) Captive insurance company d) Reinsurance company

c) Captive insurance company

Which one of the following methods can be used by a risk management professional to provide high-level executives with the basic information necessary to understand where a risk issue should be ranked among other risk-related priorities? a) Feedback loop b) Bow-tie diagram c) Dashboard reporting d) Pie chart diagram

c) Dashboard reporting