CO Property & Casualty

RST Insurance Company sells auto insurance only through the Internet. What type of marketing system does RST use? -the exclusive agency system -direct response marketing -the independent agency system -insurance brokers

direct response marketing

When completing an insurance application, Dusty intentionally lied about his age in order to obtain a lower rate. What is Dusty's lie technically considered? -waiver -concealment -misrepresentation -estoppel

misrepresentation

Andy grows crops and dairy cattle on his farm. Which of the following items could Andy cover under a mobile agricultural machinery and equipment coverage form? -bulk milk tanks -a stake truck -a tractor -irrigation equipment

a tractor

Which of the following is a peril? -icy sidewalk -dented fender -theft -home ownership

theft

A businessowners policy combines coverages that might otherwise be written on all the following types of forms EXCEPT: -inland marine -workers compensation -crime -liability

workers compensation

Which of the following does NOT describe a principal-agent relationship between the parties? -A homeowner hires a plumber to repair a faucet. -A grocer has its employee deliver groceries to a customer. -An insurance company appoints a producer to sell its policies. -A client retains an attorney to represent her.

A homeowner hires a plumber to repair a faucet.

Among Glenda's business insurance policies is an equipment breakdown policy that covers breakdowns of covered equipment at her factory. Which of the following does not qualify as a breakdown? -A punch press sustains a mechanical failure. -An air compressor stops producing the required amount of air pressure. -A large boiler ruptures and floods the factory floor. -A telephone system stops working due to some internal problem.

A large boiler ruptures and floods the factory floor.

Roberta, a new producer, is eager to write as much business as she can. In her pursuit, which of the following policies will Roberta be able to write? -A life insurance policy on her sister -A property and casualty policy covering her business -A life insurance policy on her husband -A life insurance policy on herself

A life insurance policy on her sister

Which of the following types of agent authority arises from the impression that the public has about the agent and his or her duty to the principal? -Implied -Apparent -Actual -Express

Apparent

Marci Jewelers does business in Minnesota, but Marci employees occasionally travel to other states to attend educational conferences, business conventions, and home and jewelry shows. Minnesota is listed in item 3.A. of Marci's workers compensation policy. The most appropriate entry for Item 3.C., "Other States Insurance," is: -"All states and U.S. territories except North Dakota, Ohio, Washington, West Virginia, Wyoming, Puerto Rico, the U.S. Virgin Islands, and Minnesota" -"None" -"All states except Minnesota" -"All states and U.S. territories"

"All states and U.S. territories except North Dakota, Ohio, Washington, West Virginia, Wyoming, Puerto Rico, the U.S. Virgin Islands, and Minnesota"

The ten animals on Pat's farm have blanket coverage under a farm livestock coverage form with a total limit of $25,000. An animal with an actual cash value of $1,500 died when it was struck by lightning—a covered peril. What is the most Pat's insurer will pay for this loss? -$2,500 -$25,000 -$3,000 -$1,500

$1,500

Workers compensation insurance rates apply to what monetary increment of payroll? -$10,000 -$100 -$100,000 -$1,000

$100

What is the minimum amount of liability coverage required in an automobile insurance policy issued in Colorado for damage to the property of others in any one accident? -$10,000 -$25,000 -$15,000 -$20,000

$15,000

Florist has a business auto policy with a $300,000 limit, and a commercial umbrella policy with a $1 million limit and a $10,000 self-insured retention. While driving the company van, Florist's driver rear-ended a school bus. The injured bus passengers' claims and damage to the bus result in a $500,000 judgment against Florist. How much will be paid by the insurer that issued the umbrella policy? -$0 -$200,000 -$190,000 -$250,000

$190,000

The leather couch in Rosendo's family room cost $2,500 when he bought it new 5 years ago. The couch was expected to last 25 years. Today the couch would cost $3,000 new. A pipe above Rosendo's family room burst, and the couch's water damage is beyond repair. Rosendo's homeowners policy, which covers water damage, provides actual cash value coverage on personal property. Disregarding any deductibles, what amount should Rosendo's insurer pay? -$3,000 -$2,400 -$1,900 -$2,500

$2,400

Lara's businessowners policy (BOP) shows a $500,000 limit on the covered building. What is the maximum amount she can recover for complete destruction of the building by a covered peril when the policy has been in force exactly six months? -$520,000 -$625,000 -$500,000 -$480,000

$520,000

The commercial general liability (CGL) policy's limited fungi or bacteria coverage endorsement is usually used when an insurer wants to -limit its exposure to mold-related bodily injury liability claims. -eliminate its exposure to mold-related bodily injury liability claims. -eliminate its exposure to first-party property claims for mold damage. -limit exposure to first-party property claims for mold damage.

-limit its exposure to mold-related bodily injury liability claims.

After forming a partnership that employs several employees who are subject to workers compensation benefits, Ofelia and Leticia bought a workers compensation insurance policy. Now their employees are protected for job-related injuries, but Ofelia and Leticia are not. What, if anything, can they do to have the same workers compensation benefits as their employees? -Add an appropriate workers compensation endorsement to their commercial general liability (CGL) insurance policy. -Add the sole proprietors, partners, officers, and others coverage endorsement to their workers compensation policy. -Add the voluntary compensation and employers liability coverage endorsement to their workers compensation policy. -Nothing; in most states there is no way to provide workers compensation benefits to the partners of a business partnership.

Add the sole proprietors, partners, officers, and others coverage endorsement to their workers compensation policy.

Jasmine kept her personal auto policy (PAP) in force because she was living in her car until she could get a job. When waking up one morning, she accidentally applied the car's cigarette lighter to her nose rather than her cigarette and sustained second-degree burns that required treatment. Why does the insurer not pay Jasmine's PAP's medical payments claim? -Jasmine did not provide a permanent address to which the claims payment could be mailed. -Jasmine lacked the insurer's permission to use the vehicle as a residence. -An exclusion applies for claims incurred while using the vehicle as a residence. -The incident did not involve collision or upset of Jasmine's car.

An exclusion applies for claims incurred while using the vehicle as a residence.

Which one of the following legally qualifies as an attractive nuisance? -An ornate Christmas display in Kurtis's front yard attracts spectators. -An open garbage can behind Meagan's garage attracts flies. -Vonda sunbathes in her backyard where guests in the hotel next door can see her. -An unfenced swimming pool in Kris's backyard is used by neighborhood children while she is at work.

An unfenced swimming pool in Kris's backyard is used by neighborhood children while she is at work.

The driver's side air bag saved Archie's life in an auto collision, but it also broke his nose. Four years after the accident, Archie's doctor told him that surgery was necessary to correct a serious sinus problem. Archie submitted a claim under the medical payments coverage of his personal auto policy (PAP). Why is his claim denied? -The claim amount exceeded the personal auto policy's medical payments limit. -Archie's medical expenses were incurred more than three years after the date of his accident. -Auto medical payments coverage does not apply to the insured's own injuries, regardless of fault. -Archie should have submitted the claim to the manufacturer of the defective airbag.

Archie's medical expenses were incurred more than three years after the date of his accident.

Which of the following is not considered Type II insurance? -Assigned risk motor vehicle insurance -Inland marine insurance -Property and casualty insurance -Fire insurance

Assigned risk motor vehicle insurance

How often must the Commissioner conduct a formal financial examination of insurers doing business in Colorado? -At least every year -At least every two years -As often as necessary -At least every five years

At least every five years

In the context of a property or casualty insurance policy, which of the following is personal property? -Automobile -House -Trees -Patio

Automobile

Gretchen's Travel Agency invites recent customers to a special presentation at which a time-share offer will be made. To relax potential buyers, she serves cocktails and snacks before and after the presentation. One of her guests has an auto accident on the way home and sues Gretchen for getting him drunk. How will the liability coverage of Gretchen's BOP respond? -The liquor liability exclusion precludes coverage for the guest's claim. -Unlike other commercial liability policies, the BOP has no liquor liability exclusion, so Gretchen has coverage for this claim. -Unless the host liability endorsement has been added to her BOP, Gretchen has no coverage for this claim. -Because she is not in the beverage business, Gretchen has coverage for this claim.

Because she is not in the beverage business, Gretchen has coverage for this claim.

The building Jonas owns has vinyl siding. Which one of the following losses would most likely be excluded by one of the maintenance or wear-and-tear exclusions in Jonas's property insurance policy? -Heat from a fire in the building next door melts the siding. -A hailstorm creates cracks in the siding. -Bees build a nest under the siding. -Pieces of siding blow off in a windstorm.

Bees build a nest under the siding.

The declarations of their homeowners policy list Benjamin and Audra as the named insureds. However, the definition of "insured" indicates that relatives living in their household are also insureds. One of the policy's insuring agreements says: "We cover personal property owned by an 'insured. . . .'" This section of their policy covers only personal property belonging to whom? -Benjamin -Benjamin and Audra -Benjamin, Audra, and their children who live with them -their children who live with them

Benjamin, Audra, and their children who live with them

Kristopher's cattle are covered under a farm property form for the broad causes of loss. Which one of the following losses to his livestock would not be covered? -Bovine flu kills Kristopher's most productive milk cow. -A bull strays onto the highway where it is struck and killed by a Mack truck. -Kristopher's livestock are electrocuted when a live power line falls into their pasture. -Wolves attack Kristopher's sheep.

Bovine flu kills Kristopher's most productive milk cow.

Which document is not included with a bail bond that a producer posts with a court on a defendant's behalf? -Certificate of insurance -Collateral receipt -Indemnity agreement -Promissory note

Certificate of Insurance

When his laptop crashed, Clifton took it to Computer Repair Shop (CRS). When he returned to pick up the repaired laptop, Clifton discovered that somebody else had already claimed it. CRS suggested that Clifton submit a theft claim under his homeowners insurance policy. What does the "No Benefit to Bailee" provision in Clifton's policy make clear? -Clifton's insurer protects CRS but not Clifton. -Clifton's insurer protects both Clifton and CRS. -Clifton's policy does not protect CRS. -Clifton's insurance does not cover Clifton's property while it is in another party's custody.

Clifton's policy does not protect CRS.

Big Banker tells mortgage loan borrowers that they must purchase their homeowners insurance from Alan, an insurance agent. Alan agrees to share his commissions from these sales with the bank representatives who send business to him. Which of the following deceptive trade practice have Big Bank and Alan committed? -Coercion of debtors -Misrepresentation -Fraud -Rebating

Coercion of debtors

Like many other policies that cover property, the equipment breakdown policy that covers the steam boiler in Pauline's church contains a flood exclusion. Why is this an important exclusion? -Cold water striking a hot boiler can cause an explosion. -Some churches have a baptistery or baptism pool that contains a lot of water. -A flood can short-circuit the boiler's electrical controls. -Leaking boilers often cause flooding.

Cold water striking a hot boiler can cause an explosion.

Two loss of use coverages are available in a dwelling policy: Coverage D—Fair Rental Value and Coverage E—Additional Living Expense. What is the difference between these two coverages? -Coverage D applies to premises that the named insured rents out, while Coverage E applies to premises the named insured occupies. -Coverage D applies to premises the named insured occupies, while Coverage E applies to premises that the named insured rents out. -Coverage D covers only the insured's extra expenses if the insured premises cannot be lived in, while Coverage E covers all living expenses. -Coverage D provides named perils coverage while Coverage E provides open perils coverage.

Coverage D applies to premises that the named insured rents out, while Coverage E applies to premises the named insured occupies.

Aimee is a wealthy widow. Items in her house and garage include expensive jewelry, a collection of fine paintings, several mink garments, and her grandfather's restored DeSoto auto, which Aimee drives on special occasions. The personal articles floater that Aimee's insurance agent recommends can be used to cover all of these items EXCEPT the: -mink garments -jewelry -paintings -DeSoto

DeSoto

When meeting with a prospect to discuss insurance, Taylor makes disparaging remarks about the financial stability and reputation of a competitor insurance company to dissuade the prospect from buying its policies. Which unfair trade practice has Taylor committed? -Unfair discrimination -Rebating -Defamation -Coercion

Defamation

If an insurer sells a personal lines policy and uses credit information to underwrite the policy or rate the risk, when must the insurer disclose this fact to the consumer? -When reading the application to the applicant. -Either when presenting the application or when the application is taken. -Only if the applicant is denied coverage. -Only when the applicant is also buying a commercial lines policy.

Either when presenting the application or when the application is taken.

After reading his insurance policy, Travis discovers several attached documents that have "endorsement" in their titles. What is the purpose of endorsements? -Endorsements indicate that the policy is recommended by a famous celebrity. -Endorsements modify the provisions in the policy form. -Endorsements are the documents that the insurance agent countersigns to validate the policy. -Endorsements contain information unique to a particular policy, such as the name of the insured.

Endorsements modify the provisions in the policy form.

Eva bought a single-family home in an "active adult" community that provides a clubhouse, swimming pool, snow removal, and other amenities which are supported by homeowners' association dues. Unfortunately, the association has inadequate property insurance on the clubhouse and charges Eva $750 as her share of paying for uninsured windstorm damage to the clubhouse roof. Does Eva's HO 3 policy cover this expense? -Eva's ordinance or law additional coverage applies. -Eva's loss assessment additional coverage applies. -No coverage applies because Eva's house was not damaged. -Eva's additional living expense coverage applies.

Eva's loss assessment additional coverage applies.

Stanley takes 12 more hours than his required continuing education hours during the three months before his license is due for renewal. Which statement is correct about the excess hours with respect to the next continuing education period? -Excess hours can be carried over only with prior permission from the Commissioner. -All excess hours may be carried over. -Excess hours can be carried over if they are earned within 120 days of the license renewal date. Excess hours cannot be carried over.

Excess hours can be carried over if they are earned within 120 days of the license renewal date.

Which of the following would not be a reason for the Insurance Commissioner to suspend or revoke an agent's license? -Making materially untrue statements in a license application -Failing to keep appointments with customers -Committing insurance fraud in another state -Misrepresenting the terms of a policy

Failing to keep appointments with customers

Graham is an architect. Various coverage extensions in Graham's building and personal property coverage form cover property in Graham's office that the form might not otherwise cover. Which of the following property items is not the subject of a coverage extension? -Graham's dog Fido -Personal effects owned by Graham's employees -Blueprints in Graham's filing cabinet -Shrubbery that Graham planted in front of his building

Graham's dog Fido

Owen Corporation has a fidelity bond from Baker Company in which Baker guarantees to Owen that Gregg, who is Owen's corporate treasurer, will not be dishonest. In this transaction, -Owen is the principal. -Gregg is the principal. -Baker is the obligee. -Gregg is the obligee.

Gregg is the principal.

An exempt commercial policyholder is any person who employs or retains a risk manager to obtain Type II insurance, excluding a purchaser of title insurance, and who meets any one of the following criteria EXCEPT: -Has annual net revenues or net sales of at least $10 million -Has an annual operating budget of at least $2.5 million -Purchased type II insurance with aggregate premiums of at least $50,000 during the most recent calendar year -Has a net worth of at least $10 million

Has an annual operating budget of at least $2.5 million

Tommie is a small town insurance agent. One of Tommie's clients has a hard-to-insure exposure that is on his state's exportable list. As a result, what can Tommie do? -He can seek coverage for this client from a foreign insurer. -He can seek coverage for this client from an alien insurer. -He can place this client's coverage in the surplus lines market after getting declinations from three admitted insurers. -He can place this client's coverage in the surplus lines market without three declinations from admitted insurers.

He can place this client's coverage in the surplus lines market without three declinations from admitted insurers.

Charmaine carries other-than-collision coverage but has no collision coverage on her auto. During the past three years, Charmaine has made four claims for physical damage to her auto. Which of them did her policy not cover? -Her car was parked in the hot sun when the windshield cracked. -A hailstorm dented the entire car. -Her car skidded into a snow bank and rolled over. -A large dog ran into the street in front of the car and damaged it when she struck the dog.

Her car skidded into a snow bank and rolled over.

Under the Terrorism Risk Insurance Act, all of the following lines of insurance are covered EXCEPT: -Workers compensation insurance -Commercial property insurance -Homeowners and dwelling insurance -Commercial liability insurance

Homeowners and dwelling insurance

James is an agent for the Pinnacle Insurance Company. Pinnacle's agency contract tells James that the company authorized him to sell its policies and to collect premiums and remit them to the company. James rents an office and prints business cards and stationery with Pinnacle's name on it. By what authority, if any, can he do these things? -Implied authority -Apparent authority -Express authority -No authority

Implied authority

A fire severely damages Tyrone's home, making it uninhabitable. He moves his family to a hotel while the house is repaired. The additional expenses incurs in housing the family are considered what type of loss? -Indirect -Ancillary -Direct -Corresponding

Indirect

Megan's friends have given her inconsistent information as to how her business's workers compensation premium is determined. Which one of these friends' statements is incorrect? -Dolly says the premium Megan pays at the beginning of the policy period is only an estimate. -Marci says Megan could be charged an additional premium after the policy period ends. -Inez insists that Megan's insurer cannot charge a premium at the beginning of her policy period and then change the premium later. -Joyce says Megan might get a partial refund after the policy period ends.

Inez insists that Megan's insurer cannot charge a premium at the beginning of her policy period and then change the premium later.

Ina's home is located in a special flood hazard area (SFHA). What does this mean with respect to the area's tendency to flood? -It will never have more than one flood during any 100-year period. -It will always have at least one flood during any 100-year period. -It has a 1 percent chance of being flooded in any given year. -It has one flood every 100 years.

It has a 1 percent chance of being flooded in any given year.

Adolfo's insurance agent has informed Adolpho that his current workers compensation policy has a 1.3 "mod" but his renewal policy will have a 1.1 "mod." Is this good news or bad news for Adolfo, and why? -It is neither good nor bad news. All it means is that Adolfo's classification code has changed. -It is good news, all else being equal, Adolfo will pay a lower renewal premium than others in his rating class. -It is both bad news and good news. Adolfo's loss experience has improved, but it is still worse than others in his rating class. -It is bad news. Adolfo's loss experience is getting worse and that will increase his premium.

It is both bad news and good news. Adolfo's loss experience has improved, but it is still worse than others in his rating class.

Which of the following is not a characteristic of a secondary agency? -It must be funded by insurers for the purpose of collecting and sharing insurance fraud information. -It must be a not-for-profit organization. -It must have a process to forward information to an authorized agency for further investigation and prosecution. -It must be designated by the Commissioner as a secondary agency.

It must be a not-for-profit organization.

For the farm liability coverage form to cover personal injury, an offense must meet all of the following conditions EXCEPT: -It must be committed during the policy period. -It must arise out of operations related to farming. -It must arise out of the insured's personal activities. -It must be committed intentionally.

It must be committed intentionally.

Don, a repairman employed by Brady HVAC, accidently cut off his own finger while repairing Jeannine's furnace ductwork. Brady carries liability and workers compensation insurance. Therefore, what does Jeannine's homeowners insurance policy cover (or not cover)? -It provides no coverage for Don's injuries because they were self-inflicted. -It provides no coverage for Don's injuries because he is eligible for workers compensation benefits from Brady. -It covers Don's injuries because he was injured on Jeannine's residence premises. -It covers Don's injuries because they were caused by Jeannine's furnace.

It provides no coverage for Don's injuries because he is eligible for workers compensation benefits from Brady.

Earline's business auto policy (BAP) includes comprehensive and collision coverage on owned autos. A high-mileage pickup truck struck debris on the road that tore the engine's oil pan, and the resulting sudden loss of oil, ruined the engine. Earline's insurer arranges to have a new engine installed, and the pickup will now be worth much more than it was before. What will the insurer pay? -It will pay nothing; striking road debris is not a covered peril. -It will pay for the new engine and its installation after making an adjustment for betterment. -It will pay the full cost of the new engine and its installation. -It will pay for the new engine and its installation after making an adjustment for diminution.

It will pay for the new engine and its installation after making an adjustment for betterment.

Josephine's novelty store is protected by a businessowners policy (BOP) that covers her building and business personal property. In what situation will the personal and advertising injury liability coverage of Josephine's BOP cover a claim? -Josephine accidentally spills paint on a customer's fur coat. -Josephine detains a suspected shoplifter who turns out to be innocent. -A customer on Josephine's business premises falls and breaks an ankle. -A window display falls and breaks the store's plateglass window.

Josephine detains a suspected shoplifter who turns out to be innocent.

Josiah runs a luggage repair business as a sole proprietor, and his wife Bonnie keeps the books. Josiah is the only named insured listed under the shop's commercial general liability (CGL) insurance policy. Bonnie's sister Ruth is a part-time employee of Josiah's business. Who is covered as an insured under the luggage repair shop's CGL policy? -Josiah and Bonnie, but only with respect to the luggage business -Josiah, Bonnie, and Ruth with respect to any business activities -Josiah only -Josiah and Bonnie with respect to any business activities

Josiah, Bonnie, and Ruth with respect to any business activities

Last year, the board of directors of Laurence Corporation voted to sell one of its subsidiaries, Eloy, Inc., which had been operating at a loss, to a competitor. Soon after the sale, Eloy's past research and development succeeded in launching a very profitable new product. Which of the following is most likely to happen? -The competitor might sue Laurence Corporation's directors and officers alleging a lack of due care in making the decision to sell the now-profitable subsidiary. -Laurence Corporation's directors and officers might sue its shareholders for failing to properly execute their duties. -The competitor might sue Laurence Corporation for misappropriating trade secrets. -Laurence Corporation shareholders might sue the directors and officers alleging a lack of due care in making the decision to sell the now-profitable subsidiary.

Laurence Corporation shareholders might sue the directors and officers alleging a lack of due care in making the decision to sell the now-profitable subsidiary.

Malcolm is a surplus lines broker who places a customer's risk with Faraway Insurance, a nonadmitted insurer. Though he checked Faraway's history of claim payments, he overlooked other pertinent reports on the company. Faraway later refuses to pay the customer's claim and files for bankruptcy. The State takes over management of the company. Who, if anyone, will likely be responsible for payment of the claim? -The State -State Insurance Guaranty Association -Faraway Insurance -Malcolm

Malcolm

Rocky sometimes transports hazardous materials by truck. Which of the following requires him to carry certain minimum limits of insurance coverage for doing so? -Motor Carrier Policies of Insurance for Public Liability Act -Occupational Safety and Health Act (OSHA) -Department of Transportation Act of 1980 -Motor Carrier Act of 1980

Motor Carrier Act of 1980

When Janine bought a new car, she also bought a new personal auto policy (PAP), but she did not cancel the policy she already had. Does she have duplicate coverage now? -Yes, but she will not be able to collect more than the higher policy's limits provide. -No, because the automatic termination provision in her first policy terminates the policy on the effective date of the replacement policy. -No, because the automatic termination provision in her second policy terminates the second policy since she already has insurance under the first policy. -Yes, because both policies remain in force until the first policy expires.

No, because the automatic termination provision in her first policy terminates the policy on the effective date of the replacement policy.

Private School's headmaster was distressed when he learned that Agnes, a full-time teacher, helped students cheat on a college entry exam. He scolded Agnes privately but, to avoid a scandal, did nothing further. A few months later he caught Agnes stealing school equipment and made a claim under the school's employee dishonesty coverage. Is the loss covered? -Yes, because a full-time teacher is an employee. -No, because employee theft coverage applies only to theft of money. -Yes, because employee theft coverage applies to property other than money. -No, because the termination as to any employee provision ended coverage for Agnes once the headmaster learned of her first dishonest act.

No, because the termination as to any employee provision ended coverage for Agnes once the headmaster learned of her first dishonest act.

Nigel and Collette formed N&C Company, a partnership that is the named insured in an Insurance Services Office, Inc. (ISO), businessowners policy (BOP). For purposes of their BOP's liability coverage, which one of the following persons is not an insured? -Rupert, Collette's husband -Norris, a customer who claims N&C damaged his property -N&C Company -Melinda, N&C's bookkeeper

Norris, a customer who claims N&C damaged his property

Which of the following is not a requirement to obtain a resident insurance producer license in Colorado? -Be of good moral character -Obtain appointment by at least two insurers -Satisfy prelicensure education requirements -Be at least 18 years of age

Obtain appointment by at least two insurers

Through a contract known as a fidelity bond, Buford guarantees to Olga that her employee, Dee, will not be dishonest. In this transaction, -Buford is the principal. -Olga is the obligee. -Dee is the obligee. -Dee is the surety.

Olga is the obligee.

Who is ultimately responsible for ensuring that applicants receive the appropriate notices about their rights under the Fair Credit Reporting Act? -Insurer -Producer -Insurance Commissioner -Governor

Producer

An insurer that issues or renews private passenger motor vehicle insurance coverage must offer an installment premium payment plan that is paid -Annually -Semi-annually -Quarterly -Monthly

Quarterly

If a loan is secured by real property, the lender may not require the borrower to provide hazard insurance coverage on the property in an amount that exceeds the -90% of the insurable value of the property improvements -Actual market value of the property -Unpaid balance of the mortgage -Replacement value of the improvements on the property

Replacement value of the improvements on the property.

Joe's personal auto policy (PAP) lists a $100 deductible for collision coverage on his Mercedes sedan but no physical damage coverage on his old Jeep. When the Jeep is being repaired, Joe borrows Robin's late-model Land Rover and has a bad accident with it. Robin carries collision coverage with a $1,000 deductible. Who will pay for the Land Rover's repairs? -Joe's insurer will pay all but $100, and Joe will pay $100. -Robin's insurer will pay all but $1,000 and Joe will have to pay $1,000. -Because the Land Rover was a temporary substitute for the Jeep, Joe has no applicable collision coverage and must pay the entire bill. -Robin's insurer will pay all but $1,000, Joe's insurer will pay $900, and Joe will pay $100.

Robin's insurer will pay all but $1,000, Joe's insurer will pay $900, and Joe will pay $100.

Now that she is going to college, Mattie wants to reduce her expenses. She sells her car and no longer needs auto insurance. What must she do to cancel her policy? -She must pay a cancellation fee. -Mattie needs to do nothing because the policy automatically terminated when she sold her car. -She must either return the policy to her insurer or give the insurer written notice of the cancellation date. -She has to forfeit the unearned premium.

She must either return the policy to her insurer or give the insurer written notice of the cancellation date.

Sheila has been involved in several auto accidents. Her personal auto policy (PAP) includes uninsured motorists coverage. Which one of the following accidents in which Sheila was injured did not involve an uninsured motor vehicle? -Sheila's car was struck by another vehicle that did not stop and could not be identified. -A driver who had no auto liability insurance ran a red light and struck Sheila's car. -Sheila had a one-car accident while driving a rented car, and she had not purchased any of the insurance offered by the rental agency. -The driver who ran into Sheila had evidence of insurance from an insurer that is now insolvent and paying no claims.

Sheila had a one-car accident while driving a rented car, and she had not purchased any of the insurance offered by the rental agency.

What act did Congress pass in response to the catastrophic losses on September 11, 2001, that involved the World Trade Center and other buildings? -Federal Emergency Management Act (FEMA) -Fair Access to Insurance Requirements (FAIR Plan) Act -Terrorism Risk Insurance Act (TRIA) -Gramm-Leach-Bliley (GLB) Act

Terrorism Risk Insurance Act (TRIA)

Consuela's business auto policy (BAP) includes comprehensive and collision coverage on all owned autos. Four of them are Jeep Wranglers. One weekend, Consuela and three of her employees take these Jeeps on a hunting expedition that does not turn out well. Which one of the following losses does her BAP cover? -One of the Jeeps is involved in a collision, and its value drops as a result of the necessary repairs to its body. -An ignition system breakdown leaves one Jeep stranded. -En route to their hunting grounds, one Jeep hits a bad pothole that destroys a tire. -The Jeep Consuela is driving overturns while climbing a hill.

The Jeep Consuela is driving overturns while climbing a hill.

Which of the following provides an insurance company with a fairly accurate means of determining the likelihood of a particular event occurring? -Adverse selection -The Law of Large Numbers -Insurable risk -Risk management

The Law of Large Number

Which of the following is most likely to be an insurable risk? -The chance that the value of land will change. -The chance that a gambler will lose a bet. -The chance that a stock's value will change. -The chance that a fire will destroy a building.

The chance that a fire will destroy a building.

Isaac's convenience store is covered by an Insurance Services Office, Inc. (ISO), businessowners policy (BOP). Which one of the following property losses does the BOP cover? -The cigarette display goes up in smoke when Isaac's coffee machine starts a fire. -The steam boiler that heats Isaac's store stops working. -Rain damages disposable diapers that were displayed under an open window. -When taking inventory, Isaac discovers that five cases of cigarettes are missing.

The cigarette display goes up in smoke when Isaac's coffee machine starts a fire.

If an employee's work-related injury causes a disability that lasts longer than two weeks from the day the injured employee left work as a result of the injury, the employee is entitled to a disability payment from -Three days after the employee left work -Seven days after the employee left work -Five days after the employee left work -The day the employee left work

The day the employee left work

Adrian left his workbench for a few minutes to answer the phone. When he returned, he discovered that his hot soldering iron had fallen into the wastebasket and started a fire. Adrian rents his shop from the building owner, and Adrian's businessowners policy (BOP) includes only business personal property and liability coverage. Why does Adrian's BOP cover the landlord's claim for damage to the building? -The fire damage was caused by Adrian's negligence. -The landlord's policy excludes fire damage caused by a tenant. -Section I of Adrian's BOP covers fire damage to the building. -The lease agreement makes him contractually responsible for fire damage to the building.

The fire damage was caused by Adrian's negligence.

For the past four years, Cheryl's business has been insured by four different insurers under commercial general liability (CGL) insurance policies with an occurrence trigger. For a claim to be covered by Cheryl's current policy: -The injury or damage must have occurred during the current policy period. -The event that produced the injury or damage must have taken place during the current policy period. -The claim against Cheryl must be made during the current policy period. -The act that produced the claim must have taken place while a previous CGL policy was in effect.

The injury or damage must have occurred during the current policy period.

A flood swept some of Bridgette's flood-damaged property onto a neighbor's land, and it swept some of a neighbor's flood-damaged property onto Bridgette's land. The debris removal coverage in Bridgette's National Flood Insurance Policy will pay for removing all the following debris EXCEPT: -The neighbor's property on the neighbor's land -Bridgette's property on the neighbor's land -Bridgette's property on Bridgette's land -The neighbor's property on Bridgette's land

The neighbor's property on the neighbor's land.

Cathy's business does not own an auto, and she never has a reason to rent one. When necessary, Cathy or one of her employees uses a personal car to run business errands. Why should Cathy's businessowners policy (BOP) include the hired auto and nonowned auto liability endorsement? -Nonowned auto coverage in the business policy is an inexpensive way to cover an auto titled in Cathy's name and used for her personal use. -The nonowned auto coverage will protect Cathy's business if an employee has an accident while using his or her personal car on company business. -The nonowned auto coverage will protect Cathy's business if she should borrow a friend's car or truck for some business-related purpose. -The hired auto coverage will protect Cathy's business if an employee has an accident while using his or her personal car on company business.

The nonowned auto coverage will protect Cathy's business if an employee has an accident while using his or her personal car on company business.

Saturn Insurance Co. failed to meet the notice requirements before a commercial insurance policy expired. Under what terms will the policy be renewed? -An identical policy period with an increased premium -An additional term of up to 90 days to allow the insurer more time to give notice -The same terms, conditions, and premium as the existing policy for an identical policy period -An identical policy period with a decreased premium.

The same terms, conditions, and premium as the existing policy for an identical policy period

What is the minimum penalty for a violation of the Colorado Fraudulent Claims and Arson Information Reporting Act? -Two months imprisonment or a fine of $500 -Three months imprisonment and a fine of $250 -Three months imprisonment or a fine of $250 -Two months imprisonment and a fine of $500

Three months imprisonment or a fine of $250

By purchasing an insurance policy, a person manages risk by -controlling it -avoiding it -transferring it -retaining it

Transferring it.

What is the maximum penalty for a violation of the Fraudulent Claims and Arson Information Reporting Act? -Three months imprisonment or a fine of $250 -Three months imprisonment and a fine of $250 -Twelve months imprisonment or a fine of $1,000 -Twelve months imprisonment and a fine of $1,000

Twelve months imprisonment and a fine of $1,000

If Xeno Insurance sells the same insurance policy to applicants Able and Baker who are insured for essentially the same hazard and live within the same municipality, but the premium for Baker's policy is considerably higher due to the particular neighborhood in which Baker lives. Xeno Insurance could be guilty of -False advertising -Misrepresentation -Unfair Discrimination -Boycott

Unfair Discrimination

Nearly all state workers compensation laws specify certain activities for which injuries are not compensable. Which of the following injuries would most likely be covered by a workers compensation policy? -During an employee softball game, Butch hits the umpire with a bat because he doesn't like the call he made. -Bubba is trying to deliberately run over Jonathan with a backhoe when he crashes the backhoe into a wall, injuring himself. -Vinnie is walking across a newly shingled roof when a loose shingle gives way and he slides down the roof, breaking his ankle. -Frank is installing steel beams for a skyscraper when he slips and falls to the floor below because he refused to wear a safety harness.

Vinnie is walking across a newly shingled roof when a loose shingle gives way and he slides down the roof, breaking his ankle.

While shopping for fruit, Walter was injured when he slipped on a banana peel that Geraldine had carelessly allowed to remain on the floor of her store. Walter sued Geraldine to recover damages. In Walter's civil action against Geraldine, -Geraldine is the plaintiff, and Walter is the defendant. -Walter is the plaintiff, and Geraldine is the defendant. -Geraldine is the claimant, and Walter is the insured. -Walter is the plaintiff, and Geraldine's insurance company is the defendant.

Walter is the plaintiff, and Geraldine is the defendant.

Salvador's business does not own any vehicles, but Salvador occasionally rents a small van to make deliveries. Otherwise, most deliveries are made by employees who use their own cars. Does Salvador's businessowners policy (BOP) need any modification to reflect his auto liability exposures? -Yes; a hired auto liability endorsement alone should be added. -No; the BOP automatically includes nonowned auto liability coverage. -Yes; a nonowned auto liability endorsement alone should be added. -Yes; a hired auto and nonowned auto liability endorsement should be added.

Yes; a hired auto and nonowned auto liability endorsement should be added.

Tia and her sister Kara hate riding the bus to school, so they pool their summer earnings to buy a car and pay for a personal auto policy (PAP). Does the PAP need to be modified in any way to reflect the fact that their car has two owners? -Yes; the joint ownership coverage endorsement should be added. -No, as long as they both live in the same household. -No, as long as they are both named in the declarations. -No, because Tia and Kara are relatives.

Yes; the joint ownership coverage endorsement should be added.

Ann, an agent, tells Julia that the homeowners policy she is selling to Julia will provide full coverage on Julia's $5,000 cocktail ring against any loss. This is not true, because coverage for theft of jewelry is limited to a smaller amount. What duty to her client did Ann fail to properly discharge? -a duty to provide the agreed-on policy -a duty to place coverage with a solvent insurer -a duty to disclose all pertinent information -concerning a proposed policy -a duty to fairly represent the terms or conditions of a proposed policy

a duty to fairly represent the terms or conditions of a proposed policy

Because Celina had three auto accidents during the past nine months, ABC Insurance Company does not want to provide coverage after the current policy expires. What will ABC send Celina to notify her of its decision? -an expiration notice -a cancellation notice -a bill for the next year's premium -a nonrenewal notice

a nonrenewal notice

When reading her business auto policy (BAP), Ericka sees several references to symbols. What does her policy mean when it refers to a symbol? -an asterisk or a dagger that refers to a footnote at the end of the policy -a one- or two-digit number in the declarations that indicates which coverages apply to which vehicle(s) -a code that describes the solvency rating of the insurer -an icon that indicates which insurance company provides a specific coverage

a one- or two-digit number in the declarations that indicates which coverages apply to which vehicle(s)

Because Leanne's personal auto policy (PAP) provides liability coverage on temporary substitute autos, Leanne's PAP will protect her against a liability claim if she is driving -a church van because the regular driver is sick. -a bumper car in an amusement park. -her sister's car onto the street because it was blocking Leanne's car in their driveway. -a pickup truck she borrows from a friend while Leanne's car is in the body shop.

a pickup truck she borrows from a friend while Leanne's car is in the body shop.

Avery works as an intermediary between retail insurance agents and insurers to obtain unusual or hard-to-place insurance for the agents' insureds. However, Avery has no underwriting or binding authority. Based on this information, what does Avery appear to be? -a managing general agent -a surplus lines broker -a retail broker -a nonadmitted insurer

a surplus line broker

Beau, a contractor on a large construction project, signs a contract in which, among other things, he agrees not to sue Mack if Mack is responsible for injury to any of Beau's employees. Having signed the contract, how should Beau also modify his workers compensation policy? -delete the subrogation condition -add Mack as an additional insured -add the Waiver of Our Right To Recover from Others Endorsement (WC 00 03 13) -add the Voluntary Compensation and Employers Liability Coverage Endorsement (WC 00 03 11 A)

add the Waiver of Our Right To Recover from Others Endorsement (WC 00 03 13)

Frederic, an independent insurance agent, has separate contractual agreements with each of the insurance companies he represents. What kind of contractual agreement are they? -implied authorizations -authorization agreements -express authorizations -agency agreements

agency agreements

Coverage E (personal liability) of the homeowners policy states that the insurer will provide a defense against liability claims at the insurer's expense when the claim -is without merit or is fraudulent. -alleges that the insured's libel or slander has damaged the claimant's reputation. -is made because the insured feels a moral obligation to a person who has been injured. -alleges bodily injury or property damage caused by a covered occurrence.

alleges bodily injury or property damage caused by a covered occurrence.

Coworkers who live near her residence ride to work in Felicia's car and help pay for her gas and other expenses. An exclusion in Felicia's auto insurance policy says it does not cover a vehicle while it is carrying persons for a fee but then seems to contradict that statement by saying the exclusion does not apply to a share-the-expense carpool. What is this apparent contradiction? -an ambiguity that works in Felicia's favor -an exception to an exclusion -an ambiguity that works in the insurer's favor -not applicable to Felicia's carpool

an exception to an exclusion

As defined in an Insurance Services Office, Inc. (ISO), homeowners insurance policy, the term "motor vehicle" is broad enough to include any of the following EXCEPT: -a motorcycle -a self-propelled walk-behind lawn mower -a motorized wheelchair -an outboard motorboat

an outboard motorboat

Tricia owns and operates a gift shop in a space that she rents from Shopping Center. Tricia's businessowners policy (BOP) provides business personal property coverage but not building coverage. The shelves, cabinets, and partitions that she attached to the walls of her store -are covered under an extension of coverage in Tricia's BOP. -are covered by the business personal property coverage of Tricia's BOP. -are covered by Shopping Center's insurance but not by Tricia's BOP. -can be covered by adding an improvements and betterments endorsement to Tricia's BOP.

are covered by the business personal property coverage of Tricia's BOP.

Matt, a parcel delivery driver, delivers a package to Christa's front porch where he is attacked by Christa's chained bulldog. In determining the degree of care that Christa owed to Matt, how would the courts probably classify Matt? -as a invitee -as a licensee -as a trespasser -as a business guest

as a invitee

Tasha runs a business in a state where she can buy workers compensation insurance from either private insurers or an insurance facility established and funded by the state that competes with private insurers. How would this state be categorized? -as having an involuntary private market plan -as having a state residual market plan -as having a monopolistic state fund -as having a competitive state fund

as having a competitive state fund

In an Insurance Services Office, Inc. (ISO), businessowners policy, where do the definitions appear? -at the end of the property section and at the end of the liability section -at the beginning of the policy -in an attached endorsement titled "Definitions" -at the end of the policy

at the end of the property section and at the end of the liability section

Eliza's car is insured under a personal auto policy (PAP) that includes liability, collision, and other-than-collision coverages. Eliza did not get rid of her car or change her personal auto policy when she bought the Chevrolet pickup truck with a 5,000 pound gross vehicle weight (GVW) rating that she just brought home. According to Eliza's PAP, Eliza has -automatic liability coverage on the pickup if she reports it to the insurer a week from today. -automatic collision coverage on the pickup if she reports it to the insurer a month from today. -automatic liability coverage on the pickup for the remainder of the policy period. -no automatic coverage for the pickup because of its weight rating.

automatic liability coverage on the pickup if she reports it to the insurer a week from today.

Underwriters use underwriting information from many sources. Which one of the following is not a source of underwriting information? -motor vehicle record -binder -loss history -agent's report

binder

Which part of the business auto policy (BAP) reflects information the policyholder provided in the application for the purpose of tailoring coverage to meet the policyholder's specific needs? -business auto coverage form -common policy conditions form -business auto declarations -nuclear energy liability exclusion endorsement

business auto declarations

Which one of the following is not one of the three standard flood insurance policies available from the National Flood Insurance Program? -residential condominium building association policy form -businessowners form -general property form -dwelling form

busniessowners form

How does an insurance company determine its loss ratio? -by dividing its earned premiums by its incurred losses -by dividing its combined ratio by its expense ratio -by dividing its incurred losses by its earned premiums -by dividing its incurred losses by its underwriting expenses

by dividing its incurred losses by its earned premiums

Insurance companies generally refuse to issue policies to cover losses that are -catastrophic -purely accidental -common or frequent -of a certain value

catastrophic

Madge's property insurance policy lists and describes eight perils that are covered. What's another name for these perils? -conditions that might increase the likely number of losses -conditions that might increase the severity of a loss -causes of loss -physical hazards

causes of loss

Jonah's Farm Livestock Coverage Form (FP 00 40) covers his livestock. As defined, this means Jonah has coverage for all of the following creatures on his farm EXCEPT: -lambs -goats -pigs -chickens

chickens

The cries of Jodie's young daughter distracted Jodie while she was driving the child to school. Jodie collided with Emanuel's car, pushing it into a telephone pole. Emanuel's car was damaged, and the telephone pole was destroyed. The resulting traffic jam delayed other drivers from getting to work on time. As defined in Jody's personal auto policy, all the following claims involve property damage EXCEPT -Emanuel's claim for expenses to rent a temporary substitute car. -Emanuel's claim for damage to his car. -the utility company's claim for destruction of the telephone pole. -claims for lost wages by the other drivers who were late to work.

claims for lost wages by the other drivers who were late to work.

Which of the following forms is not an essential part of a complete commercial property policy that uses ISO forms? -common policy conditions form -causes of loss form(s) -declarations page(s) -commercial general liability coverage form

commercial general liability coverage form

Haley's new law office is located in a commercial condominium unit she purchased. Which of the following forms would be appropriate for insuring Haley's property exposures? -condominium association coverage form -HO 6 unit-owners form -condominium commercial unit-owners coverage form -legal liability coverage form

condominium commercial unit-owners coverage form

In her insurance policy, Tracy discovers a number of provisions that she thinks should be worded more clearly and asks her insurance agent to change them. The agent explains that changes to the wording are not generally permitted because the insurance policy is a(n): -contract of adhesion -conditional contract -aleatory contract -personal contract

contract of adhesion

Max buys an expensive commercial lawn mower for his landscaping business. The contractors' equipment floater he purchased to cover this mower will most likely have all the following features EXCEPT: -coverage for physical depreciation -a coinsurance clause -either named perils or open perils coverage -actual cash value coverage

coverage for physical depreciation

Colin hires Sal, a retired farmer, to help him with the harvest. Sal is seriously injured when he falls off the tractor he was operating in Colin's field. Colin's farm liability coverage form -covers Sal's injuries because he was injured on the farm premises. -does not cover Sal's injuries because falling off a tractor is expected to cause injury. -covers Sal's injuries if state law requires Colin to provide workers compensation benefits. -covers Sal's injuries unless state law requires Colin to provide workers compensation benefits.

covers Sal's injuries unless state law requires Colin to provide workers compensation benefits.

Protection and indemnity policies generally provide shipowners with broad liability coverage for all of the following EXCEPT: -damage to passengers' baggage -removal of a wrecked hull -damage to docks -passengers' illness

damage to passengers' baggage

QBS Insurance Company uses class rating to determine the premiums for its auto insurance policies. This means that the rate for every insured driver is -based on the underwriter's judgment of that individual applicant. -determined by placing the driver and vehicle into a class with other similar drivers and vehicles. -developed by evaluating the vehicle's construction, protection, and other factors. -based solely on that driver's past loss experience.

determined by placing the driver and vehicle into a class with other similar drivers and vehicles.

While Roderick was making a delivery, a radiator hose on his delivery van suddenly burst and sprayed a mix of antifreeze and water. The spray stained the customer's new concrete driveway, and the customer wants Roderick to pay to have the driveway resurfaced. The pollution exclusion in Roderick's business auto policy -excludes coverage for this accidental discharge of a coolant necessary to the truck's operation. -excludes coverage for the damage caused by antifreeze but not for the damage caused by rusty water. -does not exclude coverage for the damage. -excludes coverage for this pollutant that was stored on Roderick's truck.

does not exclude coverage for the damage.

When an insurance policy provides crime coverage on a loss sustained basis, coverage is triggered by a loss that occurs -during the policy period and is discovered at any time after the policy period has ended. -after the retroactive date and is discovered during the policy period. -during the policy period and is discovered within one year after the policy period ends. -90 days after the policy period ends.

during the policy period and is discovered within one year after the policy period ends.

Lila was rushed to the emergency room from her office at the Robin Company when she choked on a jelly bean manufactured by Candy Company. The following week, she asked Candy Company to pay her medical bills. Candy Company has a commercial general liability (CGL) insurance policy with medical payments coverage that -excludes liability coverage for employees such as Lila who are injured on the job. -excludes coverage for Lila's claim from ingesting a Candy Company product away from Candy Company's premises. -covers a liability claim arising out of the use of Candy's products. -covers small liability claims such as this because Shelly reported it within one year of the incident.

excludes coverage for Lila's claim from ingesting a Candy Company product away from Candy Company's premises.

Student housing is in high demand, so Jordan converted her home's attached garage into an apartment that is normally occupied year-round by students who pay $300 per month. One tenant accidentally started a fire in the apartment. Jordan was unable to rent it for three months while the damage was being repaired. Which coverage in Jordan's homeowners insurance policy covers her rental income loss? -fair rental value -reasonable repairs -additional living expense -civil authority prohibits use

fair rental value

While driving, Tessa ran a red light and broadsided Victor's pickup. Victor was hospitalized for a week and spent another month recovering from injuries he suffered from the accident. In addition to paying his medical bills and reimbursing his lost wages, Tessa's insurer was required to pay additional damages for Victor's pain and suffering. What is the money paid for Victor's pain and suffering? -special damages -compensatory damages -general damages -punitive damages

general damages

After her insurance agent explained the options available under a business auto policy, Malinda decided to purchase specified causes of loss coverage, rather than comprehensive coverage, on the trucks in her fleet. Malinda will not have coverage for loss to a covered auto caused by: -glass breakage -earthquake -theft -flood

glass breakage

Underinsured motorists coverage protects an insured when an accident is caused by a motorist who -has no auto liability insurance. -is driving a rental car. -is not legally responsible for causing the accident. -has limits of insurance lower than the insured's uninsured motorists/underinsured motorists (UM/UIM) limits.

has limits of insurance lower than the insured's uninsured motorists/underinsured motorists (UM/UIM) limits.

Miles is told that his application for auto insurance was rejected based on information in his motor vehicle report (MVR). Which of the following is material underwriting information that might have appeared on Miles' MVR? -his low credit score -the driving records of his wife and children -his driving under the influence (DUI) conviction -how many miles he drives each year

his driving under the influence (DUI) conviction

Protection and indemnity policies generally provide shipowners with broad liability coverage against: -loss resulting from towing a vessel that is not in distress -damage to passengers' baggage -collision with other ships -injury to crew members

injury to crew members

A commercial umbrella liability policy issued to a small business provides excess limits of coverage over and above the liability limits provided by all the following policies EXCEPT: -employers liability -inland marine -auto liability -businessowners

inland marine

Unlike an insurance policy, a surety bond -is independent of other contracts. -is a three-party contract. -can usually be canceled at any time. -covers only fortuitous losses.

is a three-party contract.

Although the physical damage coverage of Arnold's garage policy protects him against loss or damage to many different vehicles, it does not protect him against loss to a vehicle that he: -hires -owns -is trying to sell -is painting for a customer

is painting for a customer

Randall and Russell make a contract to rob a tourist. They agree that Randall will lead her near a dark alley where Russell will take her purse. They promise to share any money and jewelry they acquire. This agreement is not a valid contract because -it has an illegal purpose -it involves more than one person -it did not include an offer -it is not in writing

it has an illegal purpose

Upon learning that Bryant, a key executive, has been kidnapped, Bryant's employer contacted the security firm listed in the declarations of its kidnap/ransom and extortion policy. The security firm was able to negotiate Bryant's release and billed his employer $250,000 for its services. Which coverage of the employer's kidnap/ransom and extortion policy will reimburse the employer for its $250,000 loss? -in-transit delivery of property -kidnap/ransom and extortion—expenses incurred -detention or hijack -kidnap/ransom and extortion—direct loss

kidnap/ransom and extortion—expenses incurred

The exclusions in a protection and indemnity (P&I) policy preclude coverage for all the following EXCEPT: -salvage charges -pollution -punitive damages awards -liability that would not exist in the absence of a contract

liability that would not exist in the absence of a contract

As defined in the farm liability coverage form, which of the following does farming not include? -mechanized processing operations -aquacultural enterprises -agricultural enterprises -roadside stands on the farm premises

mechanized processing operations

Most of his neighbors keep their cars locked when they are parked outdoors overnight, but Cecil leaves his car unlocked with the keys in the ignition. Cecil says if his car is stolen, he'll just make a claim on his insurance policy. What is Cecil's indifference to loss an example of? -exposure unit -peril -morale hazard -physical hazard

morale hazard

As a DEF Insurance Company policyholder, Simone enjoys the fact that she is also one of the company's owners and that the company might even pay her dividends. What type of insurer is DEF? -mutual -reciprocal -exclusive -stock

mutual

During a storm, wind blows furniture on the balcony of Debora's apartment against a window, creating a small hole in the glass. Instead of repairing the opening, she does nothing but later makes a claim under her Dwelling Property 3—Special Form (DP 00 01) or DP 3 for rain damage to her indoor furniture. Which exclusion in her policy may lead the insurer to deny her claim? -falling objects -intentional loss -neglect -removal

neglect

Darrel's car is insured under a personal auto policy (PAP) that includes liability, collision, and other-than-collision coverages. Darrel did not dispose of his car or change his PAP when he bought a heavy duty pickup truck with a 12,000-pound gross vehicle weight rating and brought it home. According to Darrel's PAP, what kind of coverage does Darrell have (or not have)? -automatic liability coverage on the pickup for the remainder of the policy period -no automatic coverage for the pickup because of its high weight rating -automatic collision coverage on the pickup if he reports it to the insurer within four days -automatic liability coverage on the pickup if he reports it to the insurer within 14 days

no automatic coverage for the pickup because of its high weight rating

Blue Company's crime policy includes these coverages: (1) inside the premises—theft of money and securities, (2) inside the premises—robbery or safe burglary of other property, and (3) computer fraud. While Blue's office was open for business, somebody walked in from the street and stole a computer. Which of Blue's coverages, if any, applies to this loss? -None of these coverages applies to this loss. -inside the premises—theft of money and securities -computer fraud -inside the premises—robbery or safe burglary of other property

none of these coverages applies to this loss.

When taking its monthly physical inventory, Agricultural Equipment Dealer (AED) discovered that a new tractor was missing from the lot where it should have been parked. Its insurer promptly paid AED's theft claim. AED later found the missing tractor on the sales lot at its other location. What does the "recovered property" condition in AED's inland marine policies require AED to do? -destroy the tractor that it had reported as missing -abandon the tractor to the insurer -take legal action against the insurer -notify the insurer

notify the insurer

Following a heated argument with her drunken boyfriend, Mona sets his bed on fire. The boyfriend escapes unharmed, but the house is damaged. Mona's homeowners insurance policy has a standard mortgage clause that names First Credit Union as mortgage holder. As regards this fire loss, what will the insurer do? -pay Mona because she is the named insured; Mona is expected to use the insurance proceeds to repair her home or pay off the mortgage -pay both First Credit Union and Mona because fire is a covered peril and they both have an insurable interest in the house -pay First Credit Union to the extent of its insurable interest, but not pay anything to Mona because she intentionally started the fire -provide no coverage for a fire that was intentionally started by the named insured

pay First Credit Union to the extent of its insurable interest, but not pay anything to Mona because she intentionally started the fire

What are the personal auto policy's collision and other-than-collision coverages collectively called? -physical damage coverage -property damage coverage -third-party coverages -comprehensive coverage

physical damage coverage

Reese County entered into a formal agreement with several other counties through which these counties would share one another's losses, and by doing so reduced the financial burden of a loss to any single county. What is this form of risk sharing? -risk transfer -indemnification -pooling -risk retention

pooling

Al's farm does not produce enough income to support his family, so he supplements his farming income by working as a veterinarian. Which exclusion in Al's farm liability coverage form precludes coverage for any loss resulting from his veterinary activities? -contractual liability -custom farming -business pursuits -professional services

professional sevices

Section III of a businessowners policy (BOP) contains common policy conditions. What do Sections I and II provide? -property and liability coverage -liability and medical payments coverage -building and contents coverage -on-premises and off-premises coverage

property and liability coverage

Which one of the following provisions is not found in the common policy conditions section of the Insurance Services Office, Inc. (ISO), businessowners coverage form? -fraud -property loss settlement -cancellation -other insurance

property loss settlement

While on a business trip, Jorge rents a car from a car rental company and crashes into a wall. Jorge's businessowners policy (BOP) includes a hired auto and nonowned auto liability endorsement. The endorsement's schedule indicates coverage for hired autos but not nonowned autos. The rental company wants Jorge to pay for the damage to its car. His BOP -does not cover this loss because it involved a nonowned auto. -provides liability coverage on a hired auto but does not cover this physical damage loss. -covers this loss even without the endorsement. -covers this loss because the endorsement applies to a hired auto.

provides liability coverage on a hired auto but does not cover this physical damage loss.

After several violations, Napoleon Bar and Grill's liquor license was revoked. Napoleon did not inform its insurer of this fact and continued to serve alcohol to its regular customers, including Brett. After a long night at the bar, Brett was involved in a serious auto accident and sued Napoleon under the applicable dramshop act. Napoleon's liquor liability insurance -provides no coverage because the accident occurred away from Napoleon's premises. -provides no coverage because Napoleon's required license was not in effect. -provides coverage if serving alcohol was incidental to Napoleon's primary business as a restaurant. -provides coverage because Napoleon was selling alcoholic beverages.

provides no coverage because Napoleon's required license was not in effect.

Lorna, a nanny, lives in Ronald's house and cares for Ronald's children. On her day off, Lorna is shopping for shoes and sprains her ankle while trying on a pair on high heels. With respect to Lorna's resulting medical expenses, the medical payments to others coverage of Ronald's policy -provides coverage because she is a resident of the household. -provides no coverage because she is eligible for workers compensation benefits for any job-related injury. -provides no coverage because she was away from the insured location and injured outside the scope of her employment. -provides coverage because she is a residence employee.

provides no coverage because she was away from the insured location and injured outside the scope of her employment.

As part of its reforms, the federal Fair Credit Reporting Act -led to the establishment of FAIR plans that cover hard-to-insure property. -requires insurers to obtain credit reports on all insurance applicants. -requires insurance applicants to be informed in advance that the insurer might order a credit report. -prohibits insurance companies from using credit reports to determine whether an applicant is eligible for insurance.

requires insurance applicants to be informed in advance that the insurer might order a credit report.

Theodore pays an annual premium to the insurance company that covers many of the risks associated with Theodore's business. What risk management technique is Theodore using? -risk control -risk avoidance -risk sharing -risk transfer

risk transfer

Tom's insurance company wanted to deny Tom's claim based on an exclusion in Tom's policy, but Tom and his lawyer convinced the court that the exclusion was ambiguous and did not clearly apply to Tom's case. Because the policy is a contract of adhesion, what will the court do? -use the arbitration process to settle the claim -rule in Tom's favor -use the appraisal process to settle the claim -rule in the insurer's favor

rule in Tom's favor

Ralph's car has been damaged beyond repair, and Ralph's insurer pays him what the car was worth just before the accident. The insurer then takes possession of the car. What is the car considered in technical terms? -surplus -salvage -scrap metal -refurbished parts

salvage

Adrienne was a painter until a malicious coworker splashed solvent in her eyes, seriously reducing the quality of her eyesight. According to the workers compensation law in Adrienne's state, she might be entitled to damages based either on the percentage her disability bears to total permanent disability or to benefits described in a: -catalog -table -program -schedule

schedule

An event has occurred aboard his ship that is probably covered under Taylor's protection and indemnity (P&I) policy. In compliance with the conditions regarding claims in the policy, Taylor should now take all the following steps EXCEPT -notify underwriters of the event. -select a defense attorney. -provide the underwriters with any documents relating to a potential claim. -cooperate with the underwriters in defending the claim.

select a defense attorney.

Lamont owns 100 shares of ABC Insurance Company stock and receives dividends from this investment. What type of insurer is ABC? -exclusive -mutual -reciprocal -stock

stock

Augusta wants her business auto policy to provide liability coverage on every auto her business owns now or adds while her policy is in force, but she sees no need for coverage on any other vehicles. For liability coverage, what symbols should the declarations on Augusta's policy use? -symbol 2 -symbols 3 and 4 -symbol 7 -symbols 1 and 2

symbol 2

Because Pierre does not want to pay for collision coverage on the older vehicles in his fleet, his business auto policy is configured to permit him to select the specific vehicles to which collision coverage applies by using what symbol? -symbol 4 -symbol 3 -symbol 1 -symbol 7

symbol 7

Which one of the following is not a peril? -theft -lightning -texting while driving -windstorm

texting while driving

Megan handles the insurance for a company that has workers compensation insurance with a Longshore and Harbor Workers Compensation Act Coverage endorsement attached. This endorsement excludes coverage for workers subject to all the following legislation EXCEPT: -the Nonappropriated Fund Instrumentalities Act -the Longshore and Harbor Workers Compensation Act -the Outer Continental Shelf Lands Act -the Defense Base Act

the Longshore and Harbor Workers Compensation Act

When business income coverage was to be added to Callie's equipment breakdown policy, the insurer required her to complete an annual report of values form. Among other things, what is this form used to determine? -the value of covered equipment -whether Callie qualifies for business income coverage -the amount to be paid to Callie in the event an equipment breakdown causes a loss of income -Callie's loss experience as regards past equipment breakdowns

the amount to be paid to Callie in the event an equipment breakdown causes a loss of income.

Tami rents store front space in a strip mall where she operates a beauty shop. One of the insuring agreements in the building and commercial property policy on Tami's beauty shop provides coverage on "business personal property." Which one of the following items is most likely covered under this insuring agreement? -the cash register -the glass windows in front of the shop -the sink in the beauty shop's rest room -the shelves attached to the beauty shop's walls

the cash register

A dump truck collided with a tall oak tree in Marian's front yard. The tree fell onto her house, breaking a glass picture window and knocking a lamp off the table inside it. Sparks from the lamp started a fire that destroyed half the house. What is the proximate cause of the damage to Marian's house? -the falling object -the fire -the glass breakage -the collision

the collision

Keri's business is protected by an Insurance Services Office, Inc. (ISO), businessowners policy (BOP) with no endorsements. Access to the premises is controlled by a computer system that locks and unlocks the doors to permit access only during normal business hours. If the control system malfunctions and allows thieves to enter the building and steal Keri's property, -the computers and data exclusion precludes coverage. -the loss will be covered by the computers and data coverage extension. -the utility services exclusion precludes coverage. -the power surges exclusion precludes coverage.

the computers and data exclusion precludes coverage.

Barbara's car was in the dealer's shop when lightning struck the building and burned to the ground. Because the dealer has a garage policy that includes liability coverage, physical damage coverage, and garagekeepers coverage with the primary direct coverage option, -the dealer's insurer will treat this as a physical damage claim and pay Barbara's loss in full. -the dealer's insurer will pay any portion of Barbara's loss that her personal auto insurance does not cover. -garagekeepers coverage does not apply because the dealer cannot be held legally responsible for a lightning strike. -the dealer's insurer will pay for the loss to Barbara's car and other customers' cars, subject to the policy's limit and deductible.

the dealer's insurer will pay for the loss to Barbara's car and other customers' cars, subject to the policy's limit and deductible.

Amelia owns four homes. Which one of them is eligible for flood coverage under the NFIP's general property form? -the eight-unit apartment building she bought as an investment -the condominium unit in the south where she spends her winters -the one-family mountain home where she spends the summer -the residential townhouse in the city where her company is headquartered

the eight-unit apartment building she bought as an investment.

In general, what do fidelity bonds guarantee? -that the insurer issuing the bond will not pay any losses -the accuracy and veracity of statements in a written document -the honesty of a person in a trusted position -that the surety will cover theft losses attributable to an employee

the honesty of a person in a trusted position

Harvey's equipment breakdown policy includes errors and omissions coverage. The errors and omissions coverage in an equipment breakdown policy is most likely to apply if the form fails to provide coverage because -a policy was requested but it was never issued. -the insured made a mistake in completing the application. -a breakdown in communication occurred. -the agent who sold the policy overstated its coverage.

the insured made a mistake in completing the application.

The property in Johnnie's apartment is insured under a DP 1 basic form dwelling policy that covers only personal property. Johnnie's policy covers losses caused by -acts of God but excludes losses caused by acts of mankind. -fire, lightning, and external explosion only. -any peril that is not excluded by his policy. -the perils named in his policy.

the perils named in his policy

Saul wants to know what dollar limits apply to the property at each of the locations that are covered by his commercial property policy. Where can Saul find this information? -the policy's coverage form -the policy's causes of loss form -the policy's declarations page -the policy's common policy conditions form

the policy's declarations page

The Information Page (declarations) of Prince Plumbing Company's workers compensation policy indicates that Prince's $4 rate, which applies to his entire payroll, is based on a certain classification code. What determines the classification code that the insurer uses? -how long Prince has been in business -the geographic location of Prince's business -the size of Prince's business -the type of business Prince operates

the type of business Prince operates

Even though his wife's expensive cocktail ring is covered by his homeowners insurance policy, Ollie insures the ring under a separate personal articles floater because he realizes the homeowners policy provides only $1,500 of coverage if the ring is lost due to what peril? -windstorm -theft -fire -removal

theft

Louis was burning leaves in his backyard when the fire got out of control and burned down his neighbor's wooden fence. If Louis wants his homeowners insurance to pay the neighbor's property damage liability claim, Louis has a duty to do all the following things EXCEPT -to inform the insurer or its agent of this occurrence in writing. -to attempt to negotiate an agreeable settlement with the neighbor. -to cooperate with the insurer in settling the claim. -to promptly forward any loss notice or demands to Louis's insurer.

to attempt to negotiate an agreeable settlement with the neighbor.

In a trailer interchange agreement, what does a motor carrier agree to? -to exchange trucks with another carrier -not to use trucks owned by another carrier -not to use trailers owned by another carrier -to exchange trailers with another carrier

to exchange trailers with another carrier

When the front fenders of Bobbie's Chevrolet coupe were damaged in an auto accident, his insurer arranged to have the damage repaired with non-original equipment manufacturer parts. Why does the insurer use non-OEM parts? -to ensure that the replacement parts were made by General Motors -to guarantee that the replacement parts are of like kind and quality -to help minimize the cost of repairs and the cost of insurance -to eliminate the deductible that Bobbie would otherwise have to pay

to help minimize the cost of repairs and the cost of insurance.

Judith's engagement ring, valued at $12,500, was reportedly stolen soon after she and her fiancé cancelled their wedding plans. Instead of paying Judith in cash, her homeowners insurance policy gives the insurer the right to do what? -to annul the engagement in writing -to assign recovery rights to her ex-fiancé -to deny coverage -to replace the missing ring

to replace the missing ring

Which of the following is not a category of workers compensation benefits payable to an injured worker or his or her dependents? -death -disability -rehabilitation -unemployment

unemployment

Auto physical damage insurance can cover loss from many perils. Which one of the following is not a peril? -fire -theft -hail -unlocked car

unlocked car

June wants to be sure her businessowners policy (BOP) covers any loss of income that her business might suffer if the water company utility shuts down her water supply due to pipeline damage. What endorsement should her BOP include? -utility services—direct damage -protective safeguards -utility services—time element -water exclusion exception endorsement

utility services—time element

Although his wife wanted to save money and buy a DP 1 basic dwelling policy, Jerrold decided to purchase a DP 2 policy on his home and his personal property. Which of the following causes of loss does his DP 2 cover that would not also be covered if he had purchased a DP 1? -weight of ice, snow, or sleet -smoke -volcanic eruption -hail

weight of ice, snow, or sleet

To earn extra money, Neal approaches travelers arriving at the airport to offer them inexpensive transportation in his sedan to local destinations. If any of these airport passengers are injured while Neal is transporting them, the medical payments coverage of Neal's personal auto policy -will not cover their medical expense unless Neal is at fault. -will cover their medical expenses subject to limited policy limits. -will not respond because his unregistered taxi service is an excluded livery conveyance. -will cover their medical expenses only if the accident is not Neal's fault.

will not respond because his unregistered taxi service is an excluded livery conveyance.

Dewey Insurance Company is a nonadmitted insurer that is on a state's white list. From this information, it seems most likely that Dewey -is operating illegally if it sells any insurance in that state. -is licensed or registered to do business in that state. -writes excess and surplus lines insurance in that state. -is a standard insurer.

writes excess and surplus line insurance in that state.