Exam 2
An insured has a vacation home covered under a Dwelling policy and he would like to add coverage to his policy for Personal Liability and Medical Payments. The insured purchased a Personal Liability Supplement with the minimum limits for Coverage M - Medical Payments. How much coverage for medical payments will the insured have for each person? $1,000. $1,500. $2,000. $2,500.
$1,000.
The general penalty for an individual violating the Insurance Code is: $500. $15,000. $10,000. $1,000.
$1,000.
An insurer doing business in Idaho has failed to report a suspected fraudulent claim. This insurer is subject to a penalty of up to: $2,500. $1,000. $5,000. $10,000.
$5,000.
The penalty for an employer that fails to provide workers compensation coverage is: A penalty of either $2.00 for each employee for each day or $25.00 for each day, whichever is greater. A penalty of $50.00 per day. A penalty of either $20.00 for each employee for each day or $250.00 for each day, whichever is greater. A penalty of $100 per day.
A penalty of either $2.00 for each employee for each day or $25.00 for each day, whichever is greater.
Fidelity bonds which apply their "limit" to each employee involved in a covered loss are called: Commercial blanket bonds. Scheduled bonds. License and bid bonds. Blanket position bonds.
Commercial blanket bonds.
When it is known that an employee is guilty of theft or other dishonest act, how is coverage affected? Coverage will continue if the employee agrees to make complete restitution. Coverage continues until the expiration date of the coverage. Coverage is cancelled immediately. Coverage will continue if an additional premium is charged for the increased exposure.
Coverage is cancelled immediately.
Fidelity bonds are used to cover: Loans on life insurance policies. Performance by the guarantor. Performance by the obligee. Employee dishonesty.
Employee dishonesty.
Part D of the personal auto policy does NOT cover: Earthquake. Explosion. Wind. Freezing.
Freezing.
All of the following statements are true regarding the chief administrative officer of a state insurance department, EXCEPT: He/She is either elected or appointed to the office, depending on state law. He/She automatically becomes a member of the NAIC. He/She sets insurance rates within their state. He/She enforces insurance laws and regulations to promote the welfare of the general public.
He/She sets insurance rates within their state.
All of the following would need a License and Permit Bond, EXCEPT: Plumbers Electricians Lawyers Real Estate Agents
Lawyers
Which of the following is NOT covered under most commercial crime policies? Legal expenses Employee theft Computer fraud Forgery and alteration
Legal expenses
All of the following statements are true of liability insurance, EXCEPT: Legal liability does not have to be determined by a court of law before an insurer will pay. Liability insurance only indemnifies third parties. Liability insurance protects the policyholder against damages he/she causes a third party. Liability insurance provides indemnification for the insured.
Liability insurance provides indemnification for the insured.
A legal term describing an intentional act that is illegal or morally wrong, and contributes to the injury of another person is: Negligence. A crime. A tort. Malfeasance.
Malfeasance.
When an insurer is called upon to defend a suit under a CGL policy, the amount that can be paid for the defense costs is: Not limited. Subject to the per occurrence limit. Subject to the general aggregate limit. Subject to the same amount as the amount of coverages for damages.
Not limited.
A road construction contractor has mobile equipment used in his business. The state has changed the law and now requires some of the equipment to carry liability insurance to comply with the financial responsibility laws of the state. What symbol will the insurance company use to add these items to the insured's commercial auto policy? Symbol 1 Symbols 8 and 9 Symbol 7 Symbol 19
Symbol 19
A typical directors and officers liability policy covers each of the following, EXCEPT: The corporation for suits brought against it because of the actions of the officers and directors. The directors and officers for their personal liability when not reimbursed by the corporation. The corporation for amounts it reimburses officers and directors in the event of a claim. The directors and officers for wrongful acts they may commit in the scope of their duties.
The corporation for suits brought against it because of the actions of the officers and directors.
Maggie Mae is a cleaning professional who works for Maid My Day household cleaning services. Maggie Mae is traveling in her own vehicle, to a client's home when she strikes and hits a pedestrian. Maggie Mae is liable as the owner and operator of the vehicle, but Maid My Day could be held _______ liable, because Maggie Mae was acting on their behalf. Vicariously Contingently Contributorily Absolutely
Vicariously
An insured had a $300,000 underlying liability policy and a $1 million umbrella liability policy with a $300,000 retained limit and a $2,000 self-insured retained limit. An occurrence resulted in $400,000 in personal injury damages which are not excluded by either policy. Shortly thereafter the insurer providing the underlying policy became insolvent. How much of the damages would be covered by the umbrella liability policy? $100,000 $300,000 $398,000 $400,000
$100,000 The fact that the underlying insurer became insolvent has no bearing on the retained limit. It would still pay the excess of $100,000 over the retained (underlying) limit of $300,000.
What limit of liability would be needed for a risk that transports radio active materials as required by the Motor Carrier Act under the MCS-90 endorsement? $500,000 $750,000 $1,000,000 $5,000,000
$5,000,000
Which of the following coverages would apply to a rental car used by an insured executive while on vacation? Coverage for nonowned autos. Drive other car coverage. Garagekeepers legal liability. Truckers coverage.
Coverage for nonowned autos.
The insured car dealer carries dealer's physical damage coverage with comprehensive and collision coverage. One of the salesmen allows an old customer to test drive a van. The customer steals the car and it is later found heavily damaged in an accident. The adjuster will: Pay the claim under "theft" since the insured carries comprehensive coverage. Pay the claim under "collision" since the insured carries collision coverage. Deny the claim unless the insured carries "false pretense" coverage. Deny the claim unless the insured carries "drive other car" coverage.
Deny the claim unless the insured carries "false pretense" coverage.
An unendorsed blanket fidelity bond: Names each covered employee specifically. Names the positions to be covered. Does not list the names of the employees. Covers specified employees by job description and position.
Does not list the names of the employees.
A guest on vacation deposits cash and traveler's checks in the hotel safe deposit box located behind the front desk. When the guest attempts to retrieve them, the box is empty. What coverage is required to cover this loss for the hotel? Funds Transfer Fraud Safe Depository Guests property Kidnap/Ransom Extortion
Guests property
What is the term used to describe the circumstance when a state requires its employers to buy coverage from a state-designated Workers Compensation program? Compulsory Elective Competitive Monopolistic
Monopolistic
Which of the following would NOT be covered under employee dishonesty? Dishonest acts of partners Loss resulting from fraudulent use of warehouse receipts Loss resulting from trading in the insured's genuine name None of these losses are covered
None of these losses are covered
A Garage policy is almost identical to a BAP, but it covers which two additional hazards? Premises & Operations and Products & Completed Operations Mechanical Breakdown and Freezing Products & Completed Operations and Freezing Mechanical Breakdown and Premises & Operations
Premises & Operations and Products & Completed Operations
When writing a Business Auto policy, insurers may be reluctant to use Symbol 1, because this provides coverage for "any auto", creating a situation where a company underwriter may feel the exposure is too great. What symbol will the underwriter most likely recommend for use in place of Symbol 1 as a method to reduce the insurance company's exposure? Symbol 2. Symbol 7. Symbol 8. Symbol 4.
Symbol 7. The underwriter will recommend that Symbol 7 (which only covers vehicles specifically listed on the Declarations page) be used to reduce the exposure for the insurance company.
Which common exclusion is intended to prevent duplicate coverage for a loss under a Commercial General Liability policy? The care, custody and control exclusion. The automobile exclusion. The pollution or contamination exclusion. The sistership exclusion.
The automobile exclusion.
Which of the following parts of the insurance contract contains the "contractual agreement" between the insurance company and the insured? The exclusions. The conditions section. The declarations page. The insuring agreement.
The insuring agreement.
Under a liability policy, "supplementary payments" include all of the following, EXCEPT: Pre- and post judgment interest. The negotiated settlement. The insured's travel expenses when incurred at the insurer's request in defense of a claim. Appeal and bail bonds.
The negotiated settlement.
With workers' compensation insurance, an experience rating serves all of the following purposes, EXCEPT: To encourage employers to prioritize safety. To reward employers with lower premiums if they have had a good loss experience. To provide a reason that employer's with a poor loss experience can be denied coverage. To provide a financial incentive for employers to control hazards in the workplace.
To provide a reason that employer's with a poor loss experience can be denied coverage.
The coverage provided under "insured contracts", as defined in a CGL policy, includes all of the following, EXCEPT: Union employment agreement. Lease of premises agreement. Elevator maintenance agreement. Easement agreement.
Union employment agreement.
"Garage operations" covered by a garage policy include: The sale of products and performance of work in connection with the garage business. The ownership, maintenance, or use of covered autos. The ownership, maintenance, or use of garage premises. All of the responses are correct.
All of the responses are correct.
The retroactive date indicated on the Declarations page of a claims-made commercial umbrella liability policy provides that coverage for injury or damage will be: Excluded after that date. Included before that date under every circumstance. Excluded before that date. Included before that date if a supplemental extended reporting period has been purchased.
Excluded before that date.
Joe owns an automobile dealership. Alex purchases a vehicle from Joe and drives it home. Later that week, Alex experiences a mechanical problem with the car and brings it back to Joe's dealership. Joe asks his best mechanic to test drive Alex's car around the block to determine the problem. While on the test drive, the mechanic hits another vehicle and injures its driver. Alex's car is also totaled in the accident. Alex's vehicle would be covered under which of Joe's policies? Garagekeepers Legal Liability Garage Liability On-Hook Towing Insurance Commercial Automobile
Garagekeepers Legal Liability
The liability section of a standardized personal auto policy will provide coverage for only one of the following vehicles. Which one is it? A taxi cab. His pick-up truck when it is rented to a neighbor. His family car while being used in car pool. A limousine he rents out for weddings and special occasions.
His family car while being used in car pool.
The Forgery and Alteration Coverage Form protects the insured from losses resulting from forgery or alteration of: I. Outgoing checks. II. Drafts. III. Promissory notes. IV. Instruments drawn against the insured. I, II, III and IV I and II only I and III only I, II, and III only
I, II, III and IV
What is the purpose of the "liberalization clause?" It states that if an insurer decides to broaden its standard policy coverages, then all outstanding policies issued prior to that decision will automatically receive those new coverages. It states that if any insured engages in political fundraising during the policy term, the insurer retains the right to suspend or cancel the policy. It states that if a mortgage liberalizes its loan agreement with the named insured, the insurer must be sent the revised wording within 60 days. It states that if the insurer broadens its underwriting eligibility requirements, all previously denied applicants must be notified within 60 days.
It states that if an insurer decides to broaden its standard policy coverages, then all outstanding policies issued prior to that decision will automatically receive those new coverages.
All of the following is considered an "insured" under a CGL policy, EXCEPT: Officers and directors. The named insured's spouse. Stockholders of the named insured. Lawyers of the named insured.
Lawyers of the named insured.
The insured carries crime coverage Insuring Agreement 6 "Computer Fraud." Funds have been secretly transferred from his checking and savings account to a bank account in Switzerland. The insured reports the loss of funds. What will the insurance company do? Deny the claim because the funds were transferred out of the covered territory Pay the claim if the funds were not transferred to a messenger of the insured off premises Deny the claim Cover the claim if they were transferred to a messenger off the insured's premises
Pay the claim if the funds were not transferred to a messenger of the insured off premises
If an Idaho employee is injured in a job related accident, workers compensation benefits will be retroactive to the date of the injury if the disability lasts more than: Three weeks. Two weeks. Four weeks. The benefits are never retroactive to the date of injury.
Two weeks.
Collision is referred to as colliding with another object or _____of the vehicle. Loss Upset or rollover Impact Destruction
Upset or rollover
To be covered under a Workers Compensation policy, the last exposure to the conditions causing bodily injury by disease must occur: During the most recent term of employment. Within the policy period. During the last day of employment. During normal working hours, excluding overtime.
Within the policy period.
The process of bringing a contract dispute before an objective third party for resolution is known as: Litigation. Mediation. Arbitration. Assignment.
Arbitration.
When the Personal Liability Supplement is purchased as a monoline policy, all of the following are required conditions, EXCEPT: Assignment. Liberalization. Death. Bankruptcy.
Bankruptcy.
All of the following bonds guarantee the payment of certain taxes, EXCEPT: Hunting and fishing license bonds Fuel bonds Liquor and tobacco Contract surety bonds
Contract surety bonds
Which statement is correct under the Commercial General Liability policy? The insured generally has the right to settle a claim for damages. The insurer generally has the right to settle a claim for damages. Both the insured and the company must agree before a claim for damages can be settled. The insurer and the third-party claimant must agree before a claim for damages can be settled.
The insurer generally has the right to settle a claim for damages.
Three of the situations below describe circumstances in which an individual is usually not an insured by a commercial umbrella liability policy. Which situation describes circumstances in which an individual IS an insured? An employee of the insured injured another employee while driving the insured's forklift. A deceased insured's brother has temporary legal custody of the insured's business property. Personal property belonging to a partner in the insured business is damaged. A stockholder in the insured corporation was driving her own auto and was involved in an accident on the way to a stockholder's meeting.
A deceased insured's brother has temporary legal custody of the insured's business property.
If Symbol 23 is used in the Declarations to identify covered autos under a Garage policy, which of the following would be a covered auto? A sedan owned by the named insured. A van owned by the named insured and used in the business. A tow truck owned by the named insured. A pickup truck purchased by the named insured 30 days after the policy begins.
A sedan owned by the named insured.
Under the liability coverage of the commercial auto policy, which of the following would NOT be covered? A third-party claim occurred a week after products were finally delivered to a customer. A third-party claim that occurred in a warehouse as an employee was using a hand truck to load a delivery truck. A third-party claim that occurred while the truck was being loaded by the use of a mechanical device attached to the truck. A third-party claim as a result of a truck being unloaded by hand.
A third-party claim occurred a week after products were finally delivered to a customer.
A couple has volunteered to do the cooking at special events for their church. The church is concerned that one of these volunteers might be injured in the kitchen and wants to protect them in case of an accident. The church maintains workers compensation coverage for its maintenance personnel. What should the church do to provide coverage? Nothing, as they are covered as employees. Purchase an accident and health policy. Add the Voluntary Compensation Endorsement to the workers compensation policy. Consider them as fully covered under the CGL policy.
Add the Voluntary Compensation Endorsement to the workers compensation policy.
Mr. Smith, an insured under a personal auto policy, loans his car to Mr. Brown. Mr. Brown is employed by a building contractor. While driving the car on his employer's business, Mr. Brown has an accident damaging a car and injuring its occupants. All three are sued. Who could be held legally liable? All three may be held responsible and have to pay. The named insured owner of the car. Mr. Smith only. Mr. Brown's employer as the entity legally responsible for the use of the car.
All three may be held responsible and have to pay.
Which of the following circumstances would NOT be an injury considered to "arise out of and in the course of" the employment? An employee was injured during a lunch break in the factory parking lot. A work-related accident occurred when the risk of injury was well known to the employee. An injury to an employee was caused by the carelessness of another worker. A workplace injury was caused by an employee's own negligence.
An employee was injured during a lunch break in the factory parking lot.
Estoppel is best exemplified by which of the following? An insurer is prohibited from denying a claim because its appointed producer advised the insured the claim covered. An insurance producer is prohibited from selling insurance with unauthorized insurers. An insurer is prohibited from appointing persons without a valid producer's license. An insured is prohibited from suing its insurer if the policy was cancelled for non-payment of premium.
An insurer is prohibited from denying a claim because its appointed producer advised the insured the claim covered.
All of the following are excluded under CGL coverage for bodily injury and property damage liability, EXCEPT: Bodily Injury or Property Damage caused by the operation of mobile equipment. An injury to an employee of the insured that is work related. Damage to property owned by the named insured. Liability resulting from intentional acts of the insured.
Bodily Injury or Property Damage caused by the operation of mobile equipment.
The APEX Corporation purchases widgets from the Holly Company. The following statement is on the back of each invoice: "Purchaser shall hold seller harmless from liability arising out of the sale of these widgets." To cover this possible loss exposure, the APEX Corporation should obtain which of the following types of insurance? Commercial General Liability Contractual Liability Contingent Liability Contractual Liability and Contingent Liability
Commercial General Liability
All of the following are examples of the types of exclusions found in professional liability insurance policies, EXCEPT: Compensatory damages. Uninsurable exposures. Contractual liability. Exposures covered under other policies.
Compensatory damages.
Owners and contractors protective liability protects against which of the following? Contingent Liability Fire Excess Liability Theft
Contingent Liability
Rusty is opening a business in his state of residence and he will hire a staff of 25 employees. He is preparing to purchase workers' compensation insurance and finds that his state is "elective". All of the following statements describe an "elective" state law, EXCEPT: In elective states, employer's can choose whether to purchase workers' compensation coverage. Employer's in elective states can still be sued by the injured employees, even if they choose to provide workers' compensation coverage. Employer's in elective states, who choose to provide workers' compensation coverage cannot be sued by their injured employees. In elective states, an employer who chooses not to provide workers' compensation coverage, loses the immunity from being sued by their injured employees.
Employer's in elective states can still be sued by the injured employees, even if they choose to provide workers' compensation coverage.
An employee suffered a severe injury while operating a piece of machinery known to be in need of repair. Unfamiliar with the Workers Compensation law, the spouse sued the employer, claiming loss of consortium. What coverage if any in a Workers Compensation policy would respond to this lawsuit? No coverage Statutory workers compensation coverage Extra-exclusive remedy liability Employers Liability coverage
Employers Liability coverage
The professional liability of a lawyer would be addressed by which type of insurance? Errors and Omissions Employer's Liability Commercial General Liability Contractual Liability
Errors and Omissions Errors and omissions insurance is a type of professional liability insurance covering attorneys and other professionals who are blamed by others for various wrongful acts.
A bank robber locks the employees and several customers in a vault and demands money for their release. If the bank is forced to pay the demands, what crime coverage if any will cover this loss? Securities stolen by others Guests Property Employee Theft Extortion-Commercial Entities
Extortion-Commercial Entities
Henry is the first named insured on a $1 million Umbrella policy. His wife, Dorothy, is also an insured. Both Henry and Dorothy were sued for $1 million in separate, unrelated suits by separate third parties. Both insureds lost their suits on the same day. In this possible but rare situation, if the Umbrella policy is applicable and the self-insured retention is not applicable: Henry will receive more protection from the policy than Dorothy because he is the first named insured. The policy will pay $500,000 toward each award. The policy will only honor Henry's claim because he is the first-named insured. Henry and Dorothy would receive the same amount of coverage, and the policy could ultimately pay a total of the $2 million amount for the two awards, subject to the "aggregate limit".
Henry and Dorothy would receive the same amount of coverage, and the policy could ultimately pay a total of the $2 million amount for the two awards, subject to the "aggregate limit".
Which of the following is considered an uninsured motorist under a standard personal automobile policy: I. A hit and run in which the driver cannot be identified. II. The insured's neighbor who backs out of his driveway into the fender of the insured's car. I only II only Neither I nor II Both I and II
I only
The "impaired property" exclusion of a CGL policy's Coverage A deals mainly with: Loss of use claims due to "impaired property". Physical injury due to the "impaired property of others". Property damage due to "impaired products". Liability due to "impaired property".
Loss of use claims due to "impaired property".
Which of the following types of policies contains a "consent to settle" clause? Auto insurance. General liability. Commercial crime. Malpractice insurance.
Malpractice insurance.
With regard to workers' compensation coverage, a "competitive" state is: One where both private and government insurers write workers' compensation policies, but the government premium rates remain the lowest and most competitive. One where the state government provides all workers' compensation policies, but there are enough different coverage choices within the program to be competitive. One where both private and government insurers write workers' compensation policies that compete against one another. One where the law requires a large enough number of workers' compensation carriers be granted a certificate of authority to write coverage so that it keeps the premium rates at a low, competitive rate.
One where both private and government insurers write workers' compensation policies that compete against one another.
A customer has eaten seafood in a restaurant and became very ill while still in the restaurant. What type of CGL claim is this? Premises Liability Products Liability Food born illnesses are not covered by a CGL policy Personal Injury
Products Liability
John Smith has just made his last car payment which concludes his contract. The finance company, for reasons not immediately apparent, has the car repossessed. If Mr. Smith brings a suit, the court will allow Mr. Smith to retake possession of the car pending the court's final ruling as to ownership if Mr. Smith provides the court a: Attachment bond. Indemnity bond. Performance bond. Replevin bond.
Replevin bond. A replevin bond guarantees that if property is in the possession of party A is determined to belong to party B and the court orders its return to party B, party A will do so. Party A would first have to obtain an attachment bond, also required by the court, in case the property was wrongfully repossessed.
The verdict in a personal injury liability suit was higher than the insured's underlying liability policy's limit of insurance. In this situation: The insured, the insurance company providing the insured's underlying policy and the company providing the insured's umbrella policy must agree on an appeal and share the expenses of that appeal. Neither the insured's underlying insurer nor the umbrella insurer may appeal without the insured's agreement. The insurance company providing the insured's umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal. The case cannot be appealed by any of the parties.
The insurance company providing the insured's umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal.
A commercial umbrella liability policy would usually cover which of the following situations? The insured claimed in a TV ad that the company's product will allow dieters to lose five pounds per week for four weeks without changing their eating habits. Several dissatisfied customers sued the insured when the product did not cause weight loss. The insured was sued for knowingly allowing its advertising agency to make untrue statements about a competitor in an advertisement for the insured's product. The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry. The insured borrowed a bulldozer from a friend and damaged it while using the machine.
The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry.
The insured has primary bodily injury and property damage liability coverage with a $100,000 limit, and a $1 million umbrella liability policy with a $5,000 self-insured retention limit. In which one of the following situations would the insured's umbrella liability policy typically not provide defense coverage? Five people sued the insured for property damage arising out of one occurrence. One of the cases was settled out of court for $100,000. The insured was sued for $150,000 in personal injury damages. The insured was sued for $10,000 in bodily injury damages. The umbrella liability policy would provide a defense in all three cases.
The insured was sued for $10,000 in bodily injury damages.
Mrs. Vincent is covered on a PAP policy which covers her 2012 Ford SUV. She carries liability and full physical damage coverage. Her neighbor owns a 2002 Chevrolet pick up truck with liability coverage only. Mrs. Vincent borrows the truck to pick up lawn furniture, parks the truck at Home Depot and leaves the keys in the ignition. The truck is stolen and later found wrecked. Which of the following would apply? The loss is covered under Mrs. Vincent's "other than collision coverage." The loss would be covered under her neighbor's policy. The loss is covered under Mrs. Vincent's collision coverage. The loss would be covered under her neighbor's homeowners coverage.
The loss is covered under Mrs. Vincent's "other than collision coverage."
A named insured in a Personal Umbrella policy has died. Which of the following is true regarding how the policy will be "assigned" following the death? The policy will be continue to cover the spouse or any member of the deceased insured's household, but only while residing in the residence premises and only until the end of the policy period. The policy will immediately become void. The insurance company will changed the name of the insured on the policy, as soon as is reasonably possible, to the name of the deceased insured's spouse or legal representative so that coverage can continue for as long as the new insured pay's the premium. The policy will provide coverage to any heirs listed in the deceased insured's last will and testament, until the end of the policy period.
The policy will be continue to cover the spouse or any member of the deceased insured's household, but only while residing in the residence premises and only until the end of the policy period.
An insured carries a general liability policy and has hired a trucking company to transport equipment to the business location. The trucking company carries a commercial auto policy. The insured loads a piece of machinery onto the truck and fails to secure it properly. The trucking company is transporting the cargo and it falls off the truck and hits another car. Which policy or policies would cover this claim? The trucking company's commercial auto policy would cover the claim. The trucking company's general liability policy would cover the claim. Both the commercial auto and the general liability policies would cover the claim. This is because the owner of the equipment was negligent in securing the cargo improperly and the trucking company's general liability policy should also share in the claim because they were transporting the unsecured cargo. Neither the commercial auto policy nor the general liability would pay the claim because both parties were negligent.
The trucking company's commercial auto policy would cover the claim.
