AD BANKER AL P&C PRACTICE COMP EXAM

If a restaurant serves a customer a bowl of clam chowder and later becomes ill, the customers illness would be covered by which of the following? A. Premises exposure B. Products exposure C. Completed operations exposure D. Products and completed operations exposure

B. By endorsement, food served in a restaurant becomes a product once served under 'product liability exposure'. They are basically treated as a manufacturer of a product, therefore: Products Exposure applies. 9.1

Which 'Additional Coverage' is found in the Homeowners Broad Form HO-2? A. Earthquake B. Collapse C. Theft of Property D. Scheduled Personal Property

B. Collapse is the only H.O. 'Additional Coverage' listed. Earthquake and Scheduled Personal Property coverages require an endorsement, and Theft of property is automatically included in a H.O. Covered Perils. 5.4

A Dwelling policy is considered to be which of the following? A. A Limited policy B. A Multiline package policy C. An Omniline policy D. A Monoline policy

D. A Dwelling policy is referred to as a Monoline policy because it only covers property. It is not a package policy. Package policies include liability and other types of coverages. Liability can be added by endorsement only. 4.1

Which rating method listed below is established by the underwriter? A. Manual rating B. Retrospective rating C. Individual rating D. Judgment rating

D. Judgment rating is the Only rating method that is determined by the underwriter. All other rating methods are determined by the actuarial department of the insurance company. 1.11

Which of the following is covered under Robbery and Safe Burglary of Other Property Crime coverage? A. Power tool taken off the shelf after the business closed B. Flashlight that was shoplifted C. Money D. Safe taken after the business has closed

D. This Crime Coverage provides coverage for Robbery and Safe Burglary of Property 'Other than Money and Securities' Only. Money is not covered, the flashlight and the power tool is not robbery or burglary. The safe being taken is considered safe burglary. 11.1

If an insurance company accepts business from a person that is not currently appointed and who is not licensed for that line of business, which of the following applies? A. Insurer may be fined up to 3 times the premium received B. Insurer may be fined up to 3 times the commission earned C. Insurer may be subject to a fine up to $10,000, imprisonment, or both D. Insurer may be fined up to $10,000

A. An insurance company may be fined up to 3 times the premium received if accepting any business from a person who is not appointed and licensed for that line of insurance. A $10,000 fine may only be applied when an agent has violated 1 or more of the grounds for suspension or revocation.

How does Government Crime coverage differ from Commercial Crime coverage in the payment of a loss? Government Crime pays on a: A. Per loss basis or per employee basis B. Per employee basis only C. Per occurrence basis D. Per loss basis only

A. Commercial Crime pays on a Per Loss Basis Only. Government Crime pays on a Per Loss basis and/or a Per Employee basis. 11.2

A Boatowners policy is usually written on what basis? A. Replacement cost B. Modified value C. Stated value D. ACV

A. Losses are typically paid on a Replacement Cost basis. 7.2

What is another name for the Legal Liability Coverage form? A. Bailee's coverage B. Time element coverage C. Tenants coverage D. Garagekeepers coverage

A. Provides coverage for damage to property of others. It is a Bailee coverage. 8.8

A good example of Risk Reduction might be: A. When one takes action to minimize the severity of a potential loss B. Insuring only those risks that threaten the financial stability of the insured C. The transfer of the risk to an insurance company D. The elimination of the exposure to a specific risk

A. Risk Reduction involves applying techniques for prevention or reduction of potential loss, such as installing sprinkler systems, burglar alarms, safety guards on machinery, etc. 1.8

Under the BOP, Additional coverages and the Extensions of coverage: A. Are provided automatically B. Are only included if indicated on the declarations page C. Must be purchased by endorsement D. Are not available with a BOP

A. The BOP is a pre-packaged policy that includes many extra coverages automatically if you maintain 80% coinsurance. However, it does not require coinsurance. If you don't maintain it you simply won't have all of the additional coverages. No endorsement is needed for 'Additional Coverages' or 'Coverage Extensions'. Optional coverages are available and must be indicated on the Dec's page. 13.1

In Liability Insurance, the maximum amount that the coverage will pay for loss to any one person regardless of overall policy limits, is known as: A. The Per Person Limit B. The Split Limit C. The Per Occurrence Limit D. The Aggregate Limit

A. The Per Person Limit is the amount of coverage available for each person that sustains bodily injuries in an occurrence. 3.3

The Workers' Compensation laws are mandatory for employers who employ ______ or more covered employees in any one business. A. 5 B. 10 C. 3 D. 20

A. The Workers' Compensation laws are mandatory for employers who employ 5 or more employees.

In Fidelity bonds, the party to whom the promise is made and for whose protection the bond is written is the: A. Obligee B. Surety C. Obligor D. Guarantor

A. There are three parties to a bond. The obligee is the party in which the bond is written to protect. If the principal defaults, the bond company (surety) guarantees payment to the obligee. The principal (obligor) is the party who promises to do or not do a specific thing. The surety (guarantor) is the party who agrees to be responsible for loss that results if the principal (obligor) does not fulfill their promise. 12.7

If the required minimum auto liability limits are 25/50/25, a driver with limits of 15/30/10 is considered to be: A. An uninsured motorist B. Both answers C. Neither answer D. An underinsured motorist

A. Uninsured is someone with less coverage than what is required by law. They could have 20/40/10 in Alabama and still be considered uninsured. Underinsured could have an amount required by law but just simply not enough to cover all of the damages. 6.4

Statutory Law Defenses are determined by which of the following? A. Enactment of Legislatures B. Administrative decisions C. Executive decisions D. Judicial decisions

A. When legislatures have felt that some Common Law Defenses are not adequate for the time or locale over which they have jurisdiction, they have replaced them with Statutory Defenses. 3.2

The right to request an appraisal belongs to: A. Both answers B. The insurance company C. Neither answer D. The insured

A. When the insured and the insurer cannot agree on the amount of indemnification/claims settlement, either party may demand an appraisal of a loss.

A Dwelling policy is considered to be which of the following? A. A Limited policy B. A Monoline policy C. A Multiline package policy D. An Omniline policy

B. A Dwelling policy is referred to as a Monoline policy because it only covers property. It is not a package policy. Package policies include liability and other types of coverages. Liability can be added by endorsement only. 4.1

The type of insurance company in which the policyholder is considered an owner, with the right to vote and share in the profits, is a: A. Fraternal benefit society B. Mutual company C. Stock company D. Risk retention group

B. A mutual company is mutually owned by the policyholders. Policyholders participate in the company's profits in the form of dividends and each policyholder has voting rights. Stock companies are owned by stock holders. Fraternal benefit societies are non-profit organizations and are member owned. Risk retention groups are group-owned insurers specializing in limited risks such as: theme parks, go-cart tracks, etc. 1.2

Which of the following describes the process where disputed claims between insured's and insurer's are decided by a neutral third party without a jury trial? A. Subrogation B. Arbitration C. Assignment D. Liberalization

B. A process where disputed claims are decided by a neutral third party between an insured and an insurer. Commonly decided in a Judges chambers without a trial. 2.1

Which of the following can be insured under an unendorsed Homeowners policy? A. A residence located on a farm B. Private residence in which the owner-occupant also maintains an office for her accounting business C. A residence used for a business but that the owner does not occupy D. A home being used as a Home Day Care

B. An unendorsed Homeowners policy is simply a homeowners policy with no endorsements attached. In order to qualify for a H.O. policy, the residence must be occupied by its owner. You must include an endorsement to provide coverage for a home being used as a Home Day Care, permitted incidental occupancies are allowed provided the owner is occupying the residence, and farm is provided in commercial policies only. 5.1

The Extra Expense coverage form provides: A.The business net income loss that would have been earned plus operating expenses B. Coverage that will permit the insured to continue in business without interruption following a property damage loss C. Coverage for business personal property while it is temporarily away from the premises at a location the insured does not own D. Coverage for the insured's legal liability for loss or damage to personal property of others in the insured's care, custody and control

B. Extra Expense coverage provides necessary additional expenses that are incurred during the period of restoration which would not have incurred had there been no direct physical loss. It permits business continuation without interruption. 8.7

Which of the following would be covered under Personal Property Coverage C of a Homeowners policy? A. Hail damage caused to the insured's boat located in the open on the on the premises B. Theft of personal fishing equipment on the insured's boat located on the premises C. Theft of personal fishing equipment on the insured's boat while away from the premises D. Wind damage caused to the insured's boat located in the open on the premises

B. H.O. Contents coverage provides for theft loss of fishing equipment on the insured's boat provided the boat is located on the insured's premises. Wind and Hail damage require the boat to be in an enclosed building at the time of loss. Theft is not covered away from the resident premises under a H.O. policy content coverage. 5.1

A home would be considered to be eligible to receive a minimum level of wind mitigation discount if it was built at least to which of the following standards? A. Gold Level B. 2006 IRC or later C. 2000 IRC or later D. Fortified for Safer Living

B. Homes built to the 2006 or later IRC requirements would qualify for the lowest level of wind mitigation discounts.

Which of the following is NOT negligence? A. Inaction B. A deliberate act C. Ignorance D. Carelessness

B. Negligence is considered to be any Unintentional Tort or Act. Anything deliberate would be considered an intentional tort. 3.2

The Basic (DP-1) Dwelling Form does not include: A. Property Removed to a Newly Acquired Residence B. Additional Living Expenses C. Fair Rental Value D. World-Wide Coverage on Personal Property

B. The Basic Dwelling Form (DP-1) provides coverage for Fair Rental Value. Coverage for Additional Living Expenses is available by endorsement. 4.2

Which one of these Commercial Inland Marine forms CANNOT be included in the Commercial Inland Marine coverage part of the Commercial Package policy? A. Valuable Papers and Records coverage form B. Commercial Builders Risk coverage form C. Signs coverage form/floater D. Commercial Articles coverage form

B. The Commercial Builders Risk coverage form is not included in the Inland Marine policy. It is its own coverage form that is provided on buildings while under construction. Commercial articles form, Valuable papers and records coverage form, and signs coverage floaters are all available under the Inland Marine Policy. 12.2

All of the following are considered 'Other than Collision' OTC coverage, except: A. Bird hitting a windshield B. Upset C. Flood D.Theft of the Auto

B. Upset is Collision. All of the other choices are considered 'Other than Collision' or OTC (Comprehensive). 6.5

Insurance binders are: A. Limited to personal lines risks B. Valid for 30 days C. Temporary or interim insuring agreements D. Required to be written

C. An insurance binder is considered to be an interim insuring agreement, which is basically a temporary policy. It may be oral or written and is generally valid for up to 90 days. It does not guarantee the issue of the policy and may be cancelled at anytime by the insurer. 2.1

In PURE contributory states, when an individual is found to have contributed to his or her own loss in any way, another party: A. May be held liable only in the case of gross negligence B. Will be assigned a degree of fault and both parties share in the loss settlement pro rata C. May not be held liable D. Is not liable because the claimant is sued under the common law: Assumption of Risk

C. Contributory negligence prevents recovery if the claimant is found to have contributed to the loss in any way, case dismissed. Assumption of risk is a common law defense that indicates if a person consciously exposes himself to danger, he must assume part of the risk. A degree of fault is assigned to each party only in the case of comparative negligence, under statutory law. Gross negligence is not a common law defense, it is a term to describe negligence. 3.2

If an HO-3 has a coverage limit of $100,000 on a dwelling, how much coverage would automatically apply to cover the insured's personal property in Coverage C? A. $10,000 B. $15,000 C. $50,000 D. $20,000

C. Coverage C - Personal Property of a H.O. policy provides up to 50% of the Coverage A - Dwelling Limit. 5.3

Which of the following can be covered as business personal property under the Businessowners policy? A. Outdoor fences B. Land C. Exterior building glass D. Satellite dishes

C. Exterior building glass is covered as business personal property for insureds who are tenants and do not have building coverage. Property Not Covered includes: Land, Outdoor fences, and satellite dishes among others. 13.3

Which of the following coverages is not included in the Commercial Crime insuring agreements, but can be added by endorsement? A. Personal articles B. Personal effects C. Extortion D. Mysterious disappearance

C. Extortion coverage is available as an endorsement. Mysterious disappearance is typically excluded, Personal effects and Personal articles are not coverages in Commercial Crime coverage. 11.2

Which description applies to General Damages? A. General Damages are damages to the general public rather than to a specific party B. General Damages include punitive damages C. It is compensation to an injured party for pain, suffering, mental anguish, disfigurement and similar types of losses D. General Damages are those damages that can be documented

C. General Damages are damages that are likely to continue into the future, and where it is difficult to put a final figure on the losses. 3.1

Which of the following would NOT be an allowable reason for cancellation of an automobile policy? A. A regular driver of the car has epilepsy B. A driver of the car has been using alcohol to excess C. The driver of the car is 17 years old and has a speeding ticket on their driving record D. The automobile is unsafe

C. Primary Grounds for Cancellation are: Nonpayment of premium, lying on an application, filing false claims, epilepsy, drug or alcohol use, felony conviction, vehicle unsafe, vehicle being used for commercial use or as an unauthorized emergency vehicle, etc.

The Insurance Guaranty Association will pay a claim of at least ____ and up to $150,000 in the event the insurance company becomes insolvent. A. $2,500 B. $1,000 C. $100 D. $500

C. The Insurance Guaranty Association is to the insurance industry, what FDIC is to the banking industry. It protects insureds against loss that might occur as a result of an insurer becoming insolvent. It will pay an amount of each covered claim that is at least $100 up to $150,000.

Who certifies an act of terrorism? A. Secretary of State B. U.S. President C. Secretary of Treasury D. Attorney General

C. The Secretary of Treasury is who ultimately makes the final decision when certifying an act of terrorism. 13.6

Under the Dwelling Under Construction Endorsement of a Dwelling Policy, which of the following is true? A. Insurance applies to the Dwelling under Coverage A and to other structures under Coverage B B. The amount of insurance at any time is the provisional amount stated in the Declarations C. The premium is based upon the average amount of insurance during construction D. The insured had up to 90 days to notify the company that the dwelling is occupied

C. The limit of liability for Coverage A is provisional and is based on the building's value upon completion. The limit of insurance in place at any time prior to completion is a percentage of the Coverage A limit that equals the proportion the actual value bears to the value on the date of completion. 4.5

Under the Business Auto coverage form, the insured's liability arising out of which of the following situations would be covered? A. Injuries sustained while operating the insured vehicle in a racing activity B. Bodily injury caused intentionally in a fit of anger C. Bodily injury resulting from loading or unloading a covered auto D. An employee that is injured in an auto accident while on company business

C. The other causes are specifically excluded under the Business Auto Liability coverage. Bodily injury sustained from loading or unloading a covered auto would be considered an accident in which the insured is legally liable. 10.3

If an insured purchased an insurance policy and suffered a claim and then found that the policy would not pay the claim as the insured thought it would, which of the following doctrines would apply? A. Principle of Indemnity B. Insurable Interest C. Reasonable Expectations D. Utmost Good Faith

C. This doctrine applies to the legal terms used to defend a policyowner. It applies to what policyowners and beneficiaries should expect from an insurance contract. Reasonable expectations of policyowners and beneficiaries will be honored even though strict terms of the policy do not support these expectations. This would be used by an attorney as a defense against an insurance company that denies benefits that seem to violate the Reasonable Expectations Doctrine. 1.10

Jim lives in a no-fault state, and he was hit by a driver that ran a stop light and Jim was injured with a broken leg. Whose insurance company will pay for Jim's injury? A. The insurance company of the person that ran the stop light B. Both Jim's and the other driver's insurance companies will each pay their proportionate share C. Jim's insurance company D. Jim's insurance company but they will try to collect from the other driver

C. When a no-fault liability law, the injured party collects insurance benefits from his own insurance as if it were first-party coverage, eliminating the need to determine negligence or legal liability. 3.2

Which of the following describes the special cause of loss form in a commercial package policy? A. Specified Perils coverage B. Named Perils coverage C. Open Perils coverage D. Comprehensive Perils coverage

C. Throughout, the Special Form is always open perils. Basic and Broad are named perils. There is no such term as Specified perils or comprehensive perils coverage. 8.2

A morale hazard: A. Is being dishonest on an application or claim form B. Is the extent to which one may be affected by a peril C. Is a physical condition that increases the probability of loss D. Arises through an individual's carelessness or irresponsible actions

D. A morale hazard refers to a persons behavior, or a persons morale. It refers to an increase in the possibility of loss through an individual's carelessness or irresponsible actions. 1.8

In insurance, which of the following best describes an occurrence? A. An accident, the cause of which cannot be determined B. An act of nature that causes damage or injury C. A sudden and unexpected event that causes damage or injury D. Someone takes blood pressure medicine and over time develops a rash

D. An event that results in a loss. An occurrence may be an accident, but may also be a continued and repeated exposure over a period to conditions that cause bodily injury or property damage. 3.1

A man becomes ill after eating a meal in a restaurant. The cost of treatment at a local hospital is $1,700. Which coverage section of the restaurant's Commercial General Liability policy will respond to the claim? A. Med Pay B. Operations C. Contractual liability D. Products

D. By endorsement, food served in a restaurant becomes a product once served under 'product liability exposure'. Product liability does not provide any Med Pay. You must prove the product caused the illness and seek recovery under BI/PD coverage. 9.1

Which of the following is NOT a possible defense against negligence? A. Intervening cause B. Statute of limitations C. Comparative negligence D. Doctrine of subrogation

D. Contributory negligence, comparative negligence, assumption of risk, intervening cause and statute of limitations are defenses against negligence. Each State Legislature will determine what defenses they will permit to operate within the state. Subrogation is not a defense, it is an insurers right to subrogate and seek reimbursement for damages from the at fault party. 3.3

With the exception of rowboats and canoes and property belonging to guests or servants, the DP-1 form covers personal property off premises: A. For personal property the insured removes from the dwelling for 90 days or until the policy expires B. All of the answers listed C. Up to a specified sub-limit of the overall Coverage C limit D. Anywhere in the world for up to 10% of the Coverage C amount

D. Coverage C - Personal property provides coverage for property removed for 5 days under the DP 1 and for 30 Days under the DP 2 and DP 3 or until the policy expires. The insured may use up to 10% of the Coverage C limit of insurance for the loss and it applies anywhere in the world. Property belonging to a guest or servant is covered on premises only. 4.2

All of the following are false statements about Medical Payments under Liability Insurance, except: A. They apply to all expenses incurred within 5 years of the accident B. They apply to members of amateur athletic teams sponsored by the insured C. They apply to all persons, including the insured on the premises for any reason D. These payments are made regardless of fault or negligence and payment is not an admission of fault

D. Medical Payments Coverage provides payment of medical and medically associated expenses on a voluntary basis, without regard to negligence or fault on the part of the insured. 3.1

Which is NOT a source for Workers' Compensation coverage? A. Competitive state funds B. Monopolistic state funds C. Private insurance companies D. Risk sharing groups

D. Risk sharing is called Reinsurance and is not one of the Workers' Compensation coverage sources. 14.10

The Commercial Inland Marine transportation form used to insure a carrier's liability for damage to cargo it is transporting is the: A. Annual Transit form B. Trip Transit form C. Bill of Lading D. Motor Truck Cargo policy

D. The Motor Truck Cargo policy/form consists of three forms: Trucker's Form which insures public truckers for liability for damage to cargo while in their possession, Shipper's Form which provides coverage for the owner of goods that have been shipped by a public trucker and Owner's form which provides coverage for a business that owns the trucks in which it transports its own goods. A Bill of Lading is a receipt of the goods being shipped. Annual transit and Trip transit are specific transportation forms for single shipments or all shipments on an annual basis. 12.3

Most of Hannah's jewelry is covered under the Coverage C special limits except for her $10,000 necklace inherited from her mother, so her agent added which of the following endorsements? A. Open Peril Personal Property B. Personal Property Replacement Cost C. Increased Limits - Coverage C D. Scheduled Personal Property

D. The Scheduled Personal Property covers certain classes of property, such as jewelry, fine arts, and coins, for a specific amount on an open peril basis. 5.6

In insurance, the term that best defines a sudden, unplanned event which is unforeseen and unintended, is: A. A happening B. A mistake C. An occurrence D. An accident

D. The insurance definition of accident is also the common dictionary definition. Note the emphasis: (1.) Sudden, (2.) Unforeseen, and (3.) Unintended. 3.1

Which of the following would NOT be found in the policy declarations page? A. Limits of insurance, deductibles, amount of premium B. A description of the property to be insured C. A legal representative in the event of the insured's death D. Insurers promise of protection

D. The insurers promise of protection would be found in the policy's Insuring Clause, not the Declarations. Remember, the Declarations describe the: Who, What, Where, When and How Much, parts of the policy. It is the policy cover page providing a quick overview of the policy. 2.4

You are driving your car with your son and the neighbor's kid to soccer practice when you run a red light and hit Calvin and his family in their car. What part of your PAP would cover the neighbor kid's injuries? A. Part C Uninsured Motorist's B. Part D Damage to 'YOUR' Auto C. Part A - Liability BI/PD D. Part B Med Pay

D. The neighbor's kid was in the insured's car, therefore, Med Pay applies. Med Pay in an Auto policy covers injuries to anyone in the insured's car. 6.3

Under the claims-made Commercial General Liability coverage form, the first date that a loss may occur and still be covered under the policy is the: A. Mini-tail date B. Policy effective date C. Reporting date D. Retroactive date

D. The retroactive date is a date in the past; anything that occurred before that date will not be covered. It serves as a way to back date the policy to cover any claims that may have occurred after the retroactive date and during the policy period or an extended reporting period provided. 9.2

Which of the following is a coverage extension that is available in the Building and Personal Property coverage form? A. Legal liability coverage form B. Earthquake form C. Time element coverage D. Property off-premises

D. This coverage extension provides up to $10,000 in additional coverage for property that is temporarily off the premises. Extensions of coverage require the insured to maintain 80% coinsurance. Earthquake coverage, Time element coverage, and Legal liability coverage are all additional coverage forms that may be purchased. These are not available as coverage extensions. 8.3

The Businessowners Policy is similar to which of the following policies? A. The Commercial Package Policy B. The Personal Automobile Policy C. The Difference in Conditions Policy D. The Homeowner Policy

D. The Businessowners Policy is a packaged policy that has a fixed number of forms designed for many small businesses with similar exposures. It is not designed to be highly flexible, as is the Commercial Package Policy. 13.1