Insurance test 1
All of the following statements about a commercial general liability policy with a claims-made form are true EXCEPT:
Coverage is triggered when the bodily injury or property damage occurs.
The Commissioner may immediately revoke or refuse to refuse to renew a producer's license without a hearing if the producer
Has been convicted of a felony
Stephanie is hired by ABC Insurance Company's home office. She does not have an insurance producer's license. Which of the following duties may she perform for ABC?
Mail company correspondence for the president
Conditions and restrictions on crime coverage under the Extortion--Commercial Entities (CR 04 03) endorsement include all of the following EXCEPT:
The captivity giving rise to the extortion threat must occur only within the U.S.
All of the following statements about an underinsured motor vehicle are accurate EXCEPT:
The vehicle has mandatory underinsured motorist vehicle coverage.
Which of the following is not the action of an agent considering the best interests of an applicant or insured?
making a misrepresentation of the terms of a proposed policy in the belief it's the only way to get the applicant to buy a policy that the agent believes is most appropriate for the applicant's needs
Alcoholism and drug abuse are examples of what type of hazard?
moral
A cause of loss is called a(n):
peril
All of the following are components of an insurance rate EXCEPT:
premium
What is the minimum amount of liability coverage required in a motor vehicle policy issued in Washington for bodily injury to or death of any one person in any one accident?
$25,000
The medical payments limit of liability shown in the declarations of Candy's personal auto policy is $2,000. Candy is injured twice in two separate accidents involving her covered auto. The medical payments expenses for the first accident are $1,500 and $3,800 for the second accident. What is the maximum that her policy will pay for expenses resulting from the two accidents?
$3,500
What is the minimum amount of liability coverage required in a motor vehicle policy issued in Washington for bodily injury to or death of more than one person in any one accident?
$50,000
Surplus lines coverage refers to certain insurance coverages that cannot be obtained from
Authorized insurers
In Washington, workers compensation is known as
Industrial insurance
What type of liability insurance would cover an employee's claim of sexual discrimination and sexual harassment by her supervisor?
employment practices liability (EPL)
Which of the following causes of loss would typically be covered under a standard property insurance policy?
tornado
Upon receipt of an insurance applicant's signed application and first premium payment, the insurer has all the following options EXCEPT:
transfer the offer to a different insurance company
How many declarations are contained in a commercial general liability policy?
two
Joanne's producer license lapsed six months ago when she failed to satisfy the continuing education requirements. A policy she sold a year ago was renewed last month. What compensation, if any, may Joanne receive from the renewal?
100% of the renewal commission
Jake's insurance producer license expired 7 months ago. His license is eligible for reinstatement as long as he submits his reinstatement application within how many months after the license's expiration date?
12 months
The maximum period for which a Washington insurance license may be suspended is
12 months
With respect to the business auto policy, what is the difference between hired autos (symbol 8) and non-owned autos (symbol 9)?
A rental car is a hired auto; an employee's pickup truck used in the business would be a non-owned auto.
Davis Insurance Company was formed under the laws of Canada. In Washington, it would be considered a(n)
Alien insurer
Which of the following is not a penalty for a licensee or insurer who commits an unfair business practice?
Community service
Samantha causes an auto accident. An injured party makes a claim against her for $30,000. She discovers that she has two concurrent policies that provide coverage. The limit of liability for Company A's policy is $50,000 while the limit of liability for Company B's policy is $100,000. How will the companies pay the claim?
Company A pays $10,000 and Company B pays $20,000.
Which of the following is not a prohibited marketing practice?
Discrimination among risks
An insurance producer must keep records of his or her insurance transactions for at least
Five years
An insurance producer who engages in deceptive business practices is subject to all of the following disciplinary measures EXCEPT:
Imprisonment
Where must a nonresident insurance producer maintain his or her place of business?
In either Washington or in the nonresident insurance producer's state of domicile
A licensed insurance producer who represents an insurer on a contractual basis and is not an employee of the insurer is called a(n)
Independent insurance producer
According to the Washington insurance code, a contract in which one party agrees to indemnify another or pay a specific amount if certain events take place is called a(n)
Insurance
Which of the following has primary responsibility for enforcing the Washington insurance laws and regulations?
Insurance Commissioner
All of the following are rating organizations that review an insurance company's financial strength in some way, EXCEPT:
Insurance Services Office (ISO)
Washington is one of only a handful of states in which the state government is the insurer for workers compensation. This means that Washington
Is a monopolistic state with respect to workers compensation.
Which of the following statements correctly describes the earthquake coverage in a standard property insurance policy?
It is generally excluded but may be covered by endorsement.
Jack and Mel are involved in an auto accident in which Jack is injured and incurs medical expenses. Jack sues Mel, and the court determines that Jack is 30 percent at fault and Mel is 70 percent at fault. If the state apportions liability under a comparative negligence law, what will happen?
Jack will recover 70 percent of his damages.
It is an unfair method of competition for a producer to portray the terms and benefits of an insurance policy inaccurately to a prospective purchaser. This deceptive practice is called
Misrepresentation
The term private passenger automobile includes which of the following?
Motor vehicle designed to carry no more than ten passengers
An agent sold a homeowners policy to Mrs. Tannenbaum, who suffers from Alzheimer's disease. When Mrs. Tannenbaum's son learned of the insurance sale, he claimed the policy was not a legal contract, requested cancellation of the policy, and obtained a full refund for which of the following reasons?
Mrs. Tannenbaum was not a competent party.
If Jackson purchases a new automobile liability insurance policy, personal injury protection coverage
Must be offered to him as optional coverage.
Ursula borrowed Felix's laptop computer to shop online. She dropped the computer and damaged the hard drive, which resulted in the loss of data files that Felix used in his business. If he files a property damage liability claim under his commercial general liability policy, will it cover the loss?
No, because a CGL policy does not define electronic data as tangible property.
Bill and Ben are employees of Norton's Appliances. Bill usually drives the company van on deliveries and Ben helps Bill unload and deliver the appliance. While they are taking a refrigerator to a customer, they collide with a large truck. Ben is injured and files a claim against Bill and Norton's Appliances. Is Ben's claim covered under Norton's business auto policy?
No, the fellow employee exclusion would apply.
Must an automobile insurance policy include coverage for property damage?
Only if issued in conjunction with coverage for bodily injury or death
Which of the following statements regarding the concept of insurable risk is true?
Only pure (not speculative) risks are insurable, but not all pure risks are insurable.
Which of the following correctly describes the premium grace period of a personal auto policy?
Personal auto policies do not have a premium grace period.
What is the basic principle underlying the law of large numbers?
Prediction becomes more accurate as the number of exposure units increases.
What does the Fair Credit Reporting Act require an insurance agent to do with respect to the insurer's gathering and review of an applicant's credit information?
Provide a disclosure to the applicant about the use of the information.
Based on the following job descriptions, which of the following persons does not need an insurance license?
Suzanne, who sets appointments for producers in an insurance agency
Mr. Pelletier is upset with his agent because his policy doesn't provide the coverage he asked for and was told the agent would apply for. Which of the following statements correctly describes the agent's responsibility in this case?
The agent is responsible in this case because one of an agent's primary duties is to obtain insurance as agreed upon.
The named insured of an automobile insurance policy is not entitled to coverage if
The incident upon which the claim is based was intentionally caused by the covered person.
Which of the following is not a valid basis for an insurer to deny, limit, or terminate personal injury protection benefits for medical and hospital services?
They were incurred more than two years of the automobile accident.
Compulsory workers compensation is not required in Washington for
Two domestic workers regularly employed in a private home for at least 40 hours per week
How long is a Washington insurance producer's license valid?
Two years
A binder or other contract for temporary insurance issued in Washington can be valid for
Up to 90 days
All of the following vehicles are excluded from coverage under medical payments coverage in the personal auto policy EXCEPT:
a sports car borrowed from its owner
Isabelle is an agent for an insurance company that is licensed to transact insurance in the state in which she lives and works. What type of insurance company does Isabelle represent?
admitted
Jack lives in Michigan. The insurance company that writes his homeowners insurance policy is incorporated in Canada. What type of insurer is Jack's insurance company?
alien
Which of the following is an example of adverse selection?
an applicant whose business was recently burglarized deciding he had better buy some commercial crime insurance coverage
Which of the following persons would be considered legally competent to apply for an insurance policy?
an individual who is physically disabled
Mrs. Innes broke her arm when the car she was driving slid on ice and smashed into a tree after being rear-ended. What definition in the personal auto policy is used to describe her broken arm?
bodily injury
Coverage under the Extended Non-Owned Coverage endorsement is most often used for a:
company car
Which of the following defenses to negligence argues that because the plaintiff's actions partly contributed to the accident, the plaintiff should bear a proportional share of the responsibility for his or her injury?
comparative negligence
Which of the following refers to state laws that require a motorist to have proof of financial responsibility as a condition of registering the auto or complying with mandatory state inspections?
compulsory insurance laws
Which section of an insurance policy sets forth the rules that determine what is required to qualify for coverage under the policy?
conditions
In an auto insurance policy, the insurance company's promise to pay benefits in the event of a covered loss is legally known as:
consideration
Which of the following terms refers to the things given by both parties to a contract that make for a legal contract?
consideration
When an applicant meets with you to buy a homeowners policy, she attempts to negotiate the terms of the contract. You tell her the terms are not negotiable and she must either purchase the policy and comply with its terms or decline to purchase the policy. You are explaining what type of contract to this applicant?
contract of adhesion
Edward is a contractor who is being sued for a construction-related bodily injury sustained by an independent subcontractor. When Edward's insurer defends the suit, it may do all of the following EXCEPT:
deposit the policy limits with the insured and walk away from any obligation to defend
The Securities Deposited with Others endorsement covers which of the following losses?
disappearance of securities deposited with others
Which of the following types of liability insurance deals with claims that involve errors or omissions in administering a company's group health insurance policy and 401(k) plan?
employee benefits liability
Susan is the HR manager of a technical support firm that is sued by Hank, a programmer formerly employed by the firm. Susan fired Hank due to his unsatisfactory work performance, but Hank claims he was a wrongfully terminated because he reported Susan's misconduct to a government regulator. What type of insurance would cover this situation?
employment practices liability (EPL) insurance
If an insurer repeatedly fails to exercise its right to cancel a policy due to a policyowner's chronically late payment of a premium, what legal principle would prevent the insurer from exercising that right later on?
estoppel
Bart suffered a serious work-related injury and receives workers compensation benefits while he is unable to work. The injury leads to his death. His wife wants to sue Bart's employer, but her attorney tells her she is prevented from suing the employer because workers compensation law contains a(n):
exclusive remedy provision
Ibey Motors sells used cars. It also repairs cars for its customers. What type of insurance coverage does Ibey Motors need to provide to cover legal liability for vehicles in its care, custody, and control?
garagekeepers liability
Several residents of the Shady Grove Nursing Home claim that they are missing some expensive jewelry. An investigation reveals that an attendant was stealing the jewelry. Which crime coverage endorsement would pay for these losses?
guests' property
What do Dram Shop laws accomplish?
imposition of liability on those selling liquor
Washington Insurance Company has established the cost of a liability insurance policy at $8.00 per $1,000 of coverage purchased. Which of the following terms correctly describes that $8 value?
insurance rate
Calvert Enterprises submits an application and initial premium for commercial insurance to Mutual Insurance Company, requesting a property insurance limit of $10 million. Mutual tells Calvert that it can only insure it for $5 million, which means:
it made a counteroffer
Underwriters know that as the number of units of exposure increases, loss prediction becomes more accurate. This basic insurance principle is known as:
law of large numbers
Which of the following correctly describes the basic purpose of the Health Insurance Portability and Accountability Act (HIPAA) as it relates to property and casualty insurers?
limit the use and disclosure of an insured's protected health information by an insurer in the processing of a claim involving medical care
Helen submitted an insurance application and premium deposit to TLS Insurance Company. In doing so, she has:
made an offer to the insurer
The purpose of the abandonment provision in a property insurance policy is to:
make it clear that the insured cannot simply walk away from damaged property
Though she lives in a high crime area, Hilda rarely locks the door to her apartment when she goes out, figuring that whatever she owns of value is insured and can be easily replaced if stolen. What type of hazard does this represent?
morale hazard
What term is used to describe the cause of a loss, such as a fire or explosion?
peril
Which of the following terms is sometimes used by insurers to refer to the insured person or property?
peril
The owner of Boulevard Bakery tells a customer that a competitor, Mel's Donut and Bagel Shop, has a filthy kitchen and does not comply with required safety standards. The customer tells Mel about these comments and Mel sues Boulevard Bakery. Which coverage under Boulevard Bakery's commercial general liability policy might cover the bakery for this claim?
personal and advertising injury
While visiting Archon Corporation, a prospective customer slips and falls in the lobby and breaks his arm. He files a claim against Archon. Which loss exposure covered under the commercial general liability policy applies in this case?
premises and operations liability
A father and his young son are shopping in a toy store for the boy's birthday present. The boy cuts his thumb on the edge of a plastic model airplane. The toy manufacturer's commercial general liability policy will cover the claim if the manufacturer has which type of insurance?
products and completed operations liability
Brad purchased an auto insurance policy to insure his new car. An insurer might consider Brad, his car, or both to be a:
risk
In talking with an applicant for auto insurance, the agent asks questions about the applicant's financial status, her assets, and her purpose for buying the policy. What is the agent hoping to accomplish by asking these questions?
sell the applicant the most suitable policy
Which of the following types of liability holds an insured legally responsible if another party is injured or damaged because its operations, or other conditions pertaining to the insured, are considered inherently dangerous?
strict liability
Trudy is driving her car when it is struck in the rear by Harry. Trudy's insurer pays for the damage to her car, but then files a claim against Harry to recover the amount it paid to Trudy. What provision in Trudy's personal auto policy gives the insurer the right to pursue Harry to recover this amount?
subrogation
Mark has arranged for ABC Insurance Company to financially guarantee that Quality Construction Co. will build an addition to Mark's house in accordance with the construction contract between Mark and Quality. This arrangement is called:
suretyship
With the business auto policy, what does an insurer use for a symbol to designate a vehicle that is NOT covered under one of the standard symbols?
symbol 10
Regarding the Farm Property-Farm Dwellings, Appurtenant Structure, and Household Personal Property Coverage Form (FP 00 12) policy, what does Coverage C-Household Personal Property of that form cover?
the insured owner's household personal property, but not farming supplies
An insurance policy involves legally enforceable promises by which party or parties?
the insurer only
To be able to predict the number of future losses occurring among their insureds, insurers rely on which of the following?
the law of large numbers
Which of the following is a "newly acquired auto"?
the named insured's private passenger car
Bonnie works for an insurance company where she assesses insurance policy applications to determine whether they should be accepted or rejected, a process known as:
underwriting
Jonas leased a brand-new Lexus for three years. What definition in his personal auto policy defines the Lexus after Jonas adds it to his policy?
your covered auto