Chapter 5 practice questions

Which one of the following best describes a reason why insureds purchase the filed inland marine Accounts Receivable Coverage Form? A. An insured can use the inland marine form to obtain a higher coverage limit than the insurer is willing to include in a package policy. B. Many businesses would be unable to collect their accounts receivable if their records were destroyed, and commercial package policies exclude coverage for accounts receivable. C. The accounts receivable insurer keeps backup copies of all the insured's computer records, including records of accounts receivable, at a secure off-premises location. D. Irreplaceable records can be scheduled on the form with an agreed value for each item.

A. An insured can use the inland marine form to obtain a higher coverage limit than the insurer is willing to include in a package policy.

Which one of the following filed inland marine policies covers merchandise that is being held for sale and can be used to cover the dealer's interest and/or lender's interest? A. Floor Plan Coverage Form B. Equipment Dealers Coverage Form C. Camera and Musical Instrument Dealers Coverage Form D. Financed Merchandise Coverage Form

A. Floor Plan Coverage Form

Rates for the traditionally non-filed classes of inland marine insurance A. Have become standardized to an extent for policies that are widely written. B. Are typically unaffected by market conditions. C. Are published in the ISO Commercial Lines Manual (CLM). D. Are provided by state insurance regulators.

A. Have become standardized to an extent for polices that are widely written.

What ocean marine insurance policy or clause covers the damage to an insured's ship if the insured ship collides with an object in the harbor? A. Hull insurance policy B. Collision liability clause C. Protection and indemnity (P&I) insurance D. Open cargo policy

A. Hull insurance policy

What ocean marine insurance policy or clause, if any, covers damage to the insured vessel caused by serious misconduct by the members of the crew contrary to the owner's interest? A. Hull insurance policy B. No coverage provided by any policy or clause C. Protection and indemnity (P&I) clause D. Collision liability clause

A. Hull insurance policy

Inland marine insurance is insurance that covers A. Many different classes of property that typically involve an element of transportation. B. Businesses that own or operate watercraft, or import or export goods. C. Miscellaneous lines such as burglary, glass, and steam boilers. D. Companies that ship goods by commercial vessel on inland waterways.

A. Many different classes of property that typically involve an element of transportation.

In 1933, the National Association of Insurance Commissioners adopted a Nationwide Marine Definition to A. Restrict the underwriting powers of marine insurers to specified types of property. B. Differentiate between the coverages offered under ocean marine policies and inland marine policies. C. Serve as a glossary of nautical terminology for the general reference of marine underwriters. D. Standardize marine insurance policy forms and rating across all states.

A. Restrict the underwriting powers of marine insurers to specified types of property.

When freight is guaranteed, the party primarily exposed to the loss of freight is the A. Shipper. B. Insurer. C. Consignee. D. Carrier.

A. Shipper

Which one of the following would be covered under the filed inland marine Valuable Papers and Records Coverage Form? A. Securities and other negotiable instruments while in transit through specified types of mail B. An architect's blueprints and plans C. The cost to reconstruct accounts receivable records D. Books of physicians, surgeons, and dentists

B. An architect's blueprints and plans

The filed classes of inland marine business are characterized by a A. Small number of potential insureds and reasonably homogenous loss exposures. B. Large number of potential insureds and reasonably homogenous loss exposures. C. Small number of potential insureds and reasonably diverse loss exposures. D. Large number of potential insureds and many diverse loss exposures.

B. Large number of potential insureds and reasonably homogenous loss exposures.

What ocean marine insurance policy or clause covers an insured shipowner's liability for damage to cargo of others being transported by the insured on the ship? A. Collision liability clause B. Protection and indemnity (P&I) insurance C. Hull insurance policy D. Open cargo policy

B. Protection and indemnity insurance

The basic types of ocean marine insurance include which of the following? A. Ocean carrier insurance B. Protection and indemnity (P&I) insurance C. Seaworthiness insurance D. Fleet insurance

B. Protection and indemnity insurance (P&!)

Ocean marine hull insurance policies usually cover on a specified perils basis rather than an "all-risks" basis. One of the specified causes of loss is "barratry." Which one of the following best describes the meaning of the term "barratry"? A. Electrical breakdown, bursting of boilers, breakage of shafts, and latent defects B. Serious misconduct by the vessel's master or crew that is contrary to the owner's interest, such as a fraudulent or criminal act that causes damage to the vessel C. War, piracy, strikes, riots, and virtually any situation in which the vessel is taken by another party D. Accidental causes of loss peculiar to the sea and other bodies of water, including abnormally high winds and rough seas, strandings, groundings, and collisions with other vessels or objects

B. Serious misconduct by the vessel's master or crew that is contrary to the owner's interest, such as a fraudulent or criminal act that causes damage to the vessel.

Which one of the following best describes the purpose served by transit insurance? A. It extends the coverage territory for shipments beyond the continental U.S., Alaska, and Canada, to include air or water shipments to or from overseas locations. B. Shippers use it because their property may be damaged in circumstances under which a carrier has no legal obligation to pay the shipper's loss. C. Carriers use this kind of policy to cover their liability for damage to property in their care, custody, or control and for which they are therefore liable. D. It provides transit coverage for items typically excluded under other property forms such as precious metals, furs, jewelry, and money and securities.

B. Shippers use it because their property may be damaged in circumstances under which a carrier has no legal obligation to pay the shipper's loss.

A filed jewelers block coverage form is designed to meet the needs of A. Jewelry wholesalers. B. Small retail jewelers. C. Jewelry manufacturers. D. Individuals with a large jewelry collection.

B. Small retail jewelers

Which one of the following statements is correct with respect to motor truck cargo liability insurance? A. It provides direct property insurance for the benefit of the cargo owner. B. Some policies limit coverage to losses caused by specified perils. C. It provides coverage for cargo losses resulting from an "act of God", such as a hurricane. D. Any property accepted by the motor carrier for delivery is covered by the insurance.

B. Some policies limit coverage to losses caused by specified perils.

A clause included in ocean marine cargo insurance that covers the cost or reasonable measures that the insured is required to take to protect property from damage at the time of loss is referred to as the A. Salvage clause. B. Sue and labor clause. C. General average clause. D. Protection of property clause.

B. Sue and labor clause.

A carrier that is prevented by an accident from delivering the cargo aboard its ship may face an exposure called loss of freight, which is A. A penalty the carrier pays the shipper for nondelivery. B. The compensation the carrier receives for transporting cargo. C. The cost of disposing of undeliverable goods. D. The liability for loss or damage to the cargo entrusted to it.

B. The compensation the carrier receives for transporting cargo.

Which one of the following inland marine forms is designed to cover photographic equipment and musical instruments used commercially by photographers, motion picture producers, professional musicians, and others? A. Theatrical Property Coverage Form B. Equipment Dealers Coverage Form C. Commercial Articles Coverage Form D. Camera and Musical Instrument Dealers Coverage Form

C. Commercial Articles Coverage Form

Which one of the following statements is correct with respect to ocean marine loss exposures? A. A vessel owner is financially responsible for damage to cargo regardless of whether the vessel owner is legally liable for the damage. B. Vessel owners cannot be held legally liable for bodily injury to crewmembers or passengers. C. For cargo owners, the possibility of loss to the cargo exists either on board a vessel or on land between the vessel and the cargo's point of origin or destination. D. Typically, the carrier requires that shipping charges be paid regardless of whether the carrier is responsible for any failure to deliver the cargo.

C. For cargo owners, the possibility of loss to the cargo exists either on board a vessel or on land between the vessel and the cargo's point of origin or destination.

Which one of the following statements is correct with respect to electronic data processing equipment floaters? A. They are required because such equipment is specifically excluded by the Building and Personal Property (BPP) Coverage Form and other commercial property forms. B. Coverage is limited to equipment, data, and media owned by the insured; the form does not cover similar property of others in the insured's care, custody, or control. C. Many cover special perils such as mechanical or electrical breakdown, and they may also insure covered property while it is in transit or at unlisted locations. D. The policy definition of "equipment" is usually limited to mainframe computers, servers, printers, disk drives and laptops.

C. Many cover special perils such as mechanical or electrical breakdown, and they may also insure covered property while it is in transit or at unlisted locations.

For which one of the following must coverage be added by endorsement to the filed inland marine Physicians and Surgeons Equipment Coverage Form? A. The insured's office equipment B. The insured's professional equipment C. Personal effects of the insured or others while on premises D. Improvements and betterments that the insured has made to the building if the insured is a tenant

C. Personal effects of the insured or others while on premises.

Which of the following ocean marine insurance policies or clauses covers an insured shipowner's liability for injuries to the passengers on board a ship into which the insured ship collided? A. Collision liability clause B. Hull insurance policy C. Protection and indemnity (P&I) insurance D. Open cargo policy

C. Protection and indemnity insurance

Which one of the following ocean marine policies or clauses covers an insured shipowner's liability for damage to a docking pier struck by the insured vessel? A. Collision liability clause B. Transit insurance C. Protection and indemnity (P&I) insurance D. Hull insurance policy

C. Protection and indemnity insurance

Which one of the following describes property that can be covered under the filed inland marine Theatrical Property Coverage Form? A. Neon, fluorescent, automatic, or mechanical signs attached to the exterior of the theatre and scheduled on the policy with a limit of insurance shown for each sign B. The cost of reshooting or rerecording exposed motion picture film and magnetic tapes or videotapes, including soundtracks, if the film or tape is lost or damaged C. Stage scenery, costumes, and other similar personal property, including property of others in the insured's care, that insured has used or intends to use in a production stated in the declarations D. Photographic equipment and musical instruments used commercially by photographers, motion picture producers, professional musicians, and others

C. Stage scenery, costumes, and other similar personal property, including property of others in the insured's care, that insured has used or intends to use in a production stated in the declarations.

Which one of the following best describes the property covered by the filed inland marine Equipment Dealers Coverage Form? A. The stock in trade of office equipment dealers, including furniture and business machines such as calculators and office supplies B. The stock in trade of dealers in "computer equipment" including medical equipment, robotics, and computerized gaming equipment C. The stock in trade of dealers that sell agricultural or construction equipment and customers' equipment in the insured's care, custody, or control D. The stock in trade of camera dealers or musical instrument dealers and similar property of others in the insured's care, custody, or control

C. The stock in trade of dealers that sell agricultural or construction equipment and customers' equipment in the insured's care, custody, or control

Which one of the following is a common example of a bailee's coverage form that covers loss to customers' goods only if the insured bailee is legally liable for the loss? A. Motor truck cargo liability policy B. Bailee's special risks coverage form C. Warehouse operator's legal liability policy D. Bailees customers' policy

C. Warehouse operator's legal liability policy

Lumber Company owns several large pieces of mobile equipment used in its lumbering operations. What type of inland marine coverage form would best be used to insure Lumber's equipment? A. Transit (transportation) B. Builders risk C. Motor truck cargo D. Contractors equipment

D. Contractors equipment

Which one of the following statements is true about judgment rating in ocean marine insurance? A. Ocean marine insurers generally use judgment rates because the filed rates are usually inadequate. B. Ocean marine insurers generally only use judgment rates when they believe the filed rates to be either inadequate or not reflective of the particular insured's loss exposures. C. Ocean marine insurers lack the underwriting expertise to properly classify and rate ocean marine loss exposures. D. Each insurer writing ocean marine insurance develops its own ocean marine rates, guided by the judgment of its underwriters.

D. Each insurer writing ocean marine insurance develops its own ocean marine rates, guided by the judgment of its underwriters.

Which one of the following best describes non-filed inland marine builders risk insurance? A. It covers liability that arises from the property owner's use of subcontractors. B. It covers a contractor's interest in building supplies or fixtures that the contractor has been hired to install but does not cover the building itself. C. It can be added to an ISO Builders Risk Coverage Form to add coverage for incidental expenses that might result from a physical loss to a building project, such as additional interest, advertising expenses, or real estate taxes. D. It covers the structure under construction, temporary structures at the building site, and building materials that have not yet become part of the building.

D. It covers the structure under construction, temporary structures at the building site, and building materials that have not yet become part of the building.

Which one of the following statements about the collision liability clause of an ocean marine hull insurance policy is true? A. It excludes liability for collision damage to other ships and their cargoes. B. It covers the insured's liability for causes other than collision. C. It covers liability for bodily injury to crew and passengers. D. It is a separate amount of insurance ordinarily equal to the amount of insurance on the hull.

D. It is a separate amount of insurance ordinarily equal to the amount of insurance on the hull.

Which one of the following best describes the bailees' customers policy? A. It is purchased by bailees to cover their legal liability for damage to the property of others while in the bailee's possession. B. It is purchased by property owners to cover damage to their property while in the care, custody, or control of a bailee and for which the bailee is not liable. C. It is purchased by property owners to cover their liability for damage to a bailee's premises caused by the property they have entrusted to the bailee. D. It is purchased by bailees to cover damage to customers' goods while in the possession of the bailee, regardless of whether the bailee is legally liable for the damage.

D. It is purchased by bailees to cover damage to customers' goods while in the possession of the bailee, regardless of whether the bailee is legally liable for the damage.

Which one of the following ocean marine insurance policies or clauses covers the insured shipowner's liability for injuries to crew members of the insured ship in the event it collides with another vessel? A. Hull insurance policy B. Open cargo policy C. Collision liability clause D. Protection and indemnity (P&I) policy

D. Protection and indemnity (P&I) policy

Which of the following can be added to a builders risk policy to cover various incidental expenses that might result from a physical loss to a building project, such as additional interest, advertising expenses, or real estate taxes? A. Contingent loss coverage B. Incidental expense coverage C. Extra expense coverage D. Soft costs coverage

D. Soft costs coverage

Which one of the following best explains why, in the 1990s, marine insurers were willing to provide broad perils or "all-risks" coverage on the types of property that fire insurers avoided covering? A. As a relatively new type of insurance company, marine insurers were looking for opportunities to grow and increase their market share. B. Marine insurers wanted to encroach on what was traditionally the territory of fire insurers and saw this as a good strategy for doing so. C. While fire insures were restricted to providing insurance only against the peril fire, marine insurers were not subject to regulatory restriction of the perils they could cover. D. They were accustomed to covering ocean cargoes of all types against many different causes of loss, including theft, while the property was either at sea or ashore.

D. They were accustomed to covering ocean cargoes of all types against many different causes of loss, including theft, while the property was either at sea or ashore.