CA Adjuster Exam Flashcards
Basic benefits available under a typical workers compensation policy include which of the following?
I. Medical expenses. II. Loss of income. III. Rehabilitation. IV. Pain and suffering. Answer Choices: Select the Correct Answer I, II, and III only. I and II only. I, III, and IV only. I, II, III and IV.
I, II, and III only. is correct.
EXPLANATION:
Workers compensation indemnifies an injured or ill worker for direct expenses resulting from the cause with rehabilitation provided to encourage a worker to return to productivity.
How is personal property of a dwelling covered under a farm policy?
Answer Choices: Select the Correct Answer
Actual Cash Value Basis
Stated Amount Basis
Agreed Amount Basis
Replacement Cost Basis
The correct answer is: Actual Cash Value Basis.
EXPLANATION:
The property is covered on an actual cash value basis. Like a homeowner policy, the replacement cost endorsement may be attached for an additional premium.
An insured is reimbursed by his insurance company for the cost of a new sofa after a 10-year-old sofa is destroyed by fire. Which of the following best describes this situation?
Answer Choices: Select the Correct Answer
Replacement Cost
Coinsurance
Actual Cash Value
Excess Loss Coverage
Replacement Cost is correct.
EXPLANATION:
Replacement cost pays for new to replace old.
Which of the following is covered by a flood policy?
Answer Choices: Select the Correct Answer
Overflow of inland or tidal water
Vehicles
A broken water main
Livestock
Overflow of inland or tidal water is correct.
EXPLANATION:
Overflow of inland or tidal water is the prime coverage under flood insurance. Mudflow is also covered. Mudslides are not. The coverage does not include damage or loss of livestock or roads.
Under the Personal Automobile policy, the definition of a “covered auto” for Coverage A (liability)includes:
I. Private passenger autos the named insured acquires during the policy period.
II. Trailers owned by the named insured.
III. Autos or trailers not owned by the named insured that is being used as a temporary substitute.
IV. Farm wagons or implements towed by a covered vehicle.
I, II, III, and IV I, II, and III only I and III only I and II only Your answer: I, II, III, and IV is correct.
Your answer: I, II, III, and IV is correct.
EXPLANATION:
Coverage A (liability) includes coverage for those vehicles shown in the declaration page of the policy. It also includes coverage for non-owned vehicles. Trailers, whether owned or non-owned are covered provided they are designed to be pulled by a private passenger type vehicle, pickup truck or van. Usually the policy excludes ‘business use’ but farming and ranching are two types of businesses that can be covered under the PAP policy. Newly acquired vehicles are covered for a period of 14 days after acquisition under most policies for liability coverage. Temporary substitute vehicles are insured when the insured vehicle is damaged, destroyed or disabled.
Other structures are excluded from coverage under the HO-3 when they are:
Smaller than 100 square feet or larger than 1,000 square feet
Smaller than 100 square feet or larger than 500 square feet
Used for storage purposes
Used for business purposes
Used for business purposes is correct.
EXPLANATION:
When the other structures are used for business purposes they are not covered under the homeowner form. This structure and its contents could be covered under a commercial property policy. An exception would be a detached structure used to store business property of a non-flammable, non-gaseous nature.
An insurance company must give how many days notice of cancellation for a vacancy of more than 60 days, when the government has ordered demolition, or when fixed items are being removed and not replaced?
5
21
10
30
5 is correct.
EXPLANATION:
The cancellation changes endorsement is the “mandatory endorsement” referred to in the question. In California, the endorsement must be included in every commercial property policy. It allows cancellation by the insurer with 5 days’ notice for several reasons: vacancy or unoccupancy for 60 or more days; damages from a prior covered loss haven’t been started; the government has ordered demolition or to vacate; fixed items are being removed and not replaced; and, utilities are shut off for 30 or more days, or property taxes are more than one year past due.
Upon request made by the consumer, a person who procures an investigative consumer report on the consumer must make a complete and accurate disclosure to the consumer of the nature of the report and investigation within:
In writing and mailed to the consumer within 30 days of the request.
In writing and mailed to the consumer within 15 days of the request.
In writing and mailed to the consumer within 10 days of the request.
In writing and mailed to the consumer within 5 days of the request.
In writing and mailed to the consumer within 5 days of the request..
EXPLANATION:
This disclosure must be made in writing and mailed or otherwise delivered to the consumer no later than five days after the date on which the request for the disclosure was received from the consumer.
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?
Answer Choices: Select the Correct Answer
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 correct answer is: The insured was sued for $10,000 in bodily injury damages.
EXPLANATION:
The claim would fall under the underlying coverage and not the umbrella because the underlying coverage has sufficient limits in place.
The BAP liability exclusion pertaining to pollution removes coverage for each of the following, except:
Answer Choices: Select the Correct Answer
The cost of governmentally ordered clean-up of pollutants.
The escape of pollutants while being transported by a covered auto.
The escape of pollutants caused by damage to the property containing them when the damage results from the use of a covered auto.
The escape of pollutants before they are accepted by the insured for movement onto a covered auto.
The escape of pollutants caused by damage to the property containing them when the damage results from the use of a covered auto. is correct.
EXPLANATION:
If the insured’s vehicle causes an accident with another vehicle or other property (owned by a third party) containing the pollutants, the loss is covered.
Which of the following would not be covered under the specified cause of loss physical damage coverage under the commercial auto form?
Glass breakage
Fire
Lightning
Flood
The correct answer is: Glass breakage.
EXPLANATION:
The specified cause of loss form covers the following perils: fire, lighting, explosion, theft, windstorm, hail, earthquake, flood, vandalism or mischief, transportation by a conveyance. The coverage does not include glass breakage, hitting a bird or animal nor falling objects or missiles.
All of the following events are considered acts of terrorism, EXCEPT:
Acts of riot and civil commotion.
Acts considered dangerous to human life, property or infrastructure.
Acts resulting in damage within or outside the United States.
Acts at the premises of any United States mission.
The correct answer is: Acts of riot and civil commotion. .
EXPLANATION:
Acts of riot and civil commotion are not covered by the Act. These are perils that are covered by property insurance policies.
A company or staff adjuster represents the interests of:
The insurer.
The insured.
The claimant.
The public.
The insurer. is correct.
EXPLANATION:
Company or staff adjusters are individuals employed by a property and casualty insurance company to settle on its behalf claims brought by insureds. They work directly for the insurance company as year-round salaried employees. Staff adjusters evaluate the merits of each claim and make recommendations to the insurance company.
Under the Personal Auto Policy the Supplementary Payments coverage is:
Answer Choices: Select the Correct Answer
In addition to the limit of liability.
Added by endorsement.
Included in the limit of liability.
Not available under the personal auto policy.
In addition to the limit of liability. is correct.
EXPLANATION:
Supplementary Payments are in addition to the Limits of Liability.
When a first party claim is made, what must be listed on the payment draft?
Answer Choices: Select the Correct Answer
Type of coverage under which payment is made
Details of the accident
Application of the deductible
Drivers license number
Type of coverage under which payment is made is correct.
EXPLANATION:
When a claim payment is made, an indication of the type of coverage under which the payment is made must be stated on the draft payment.
Under the Commercial Property Policy, the Pro-rata Liability Clause means:
Answer Choices: Select the Correct Answer
Each insurer pays its limits under the policy.
Neither Insurer Pays
Each insurer pays in accordance to the percentage of its coverage bears to the total amount of insurance.
A Form of Coinsurance Clause
Each insurer pays in accordance to the percentage of its coverage bears to the total amount of insurance. is correct.
EXPLANATION:
The insurer will not be liable for a greater proportion of a loss than the amount insured will bear to the whole insurance covering the property against the peril involved, whether collectible or not. This is often referred to as the “Other Insurance” clause.
David has damaged his vehicle by striking a tree. He can:
I. Take the car to a repair garage recommended by the insurer.
II. Take the car to a garage of his choice.
III. Accept payment based on the adjuster’s estimate.
Answer Choices: Select the Correct Answer
I, II and III
I and II only
I and III only
I only
I, II and III is correct.
EXPLANATION:
The choice belongs to the David, the insured.
Under a farm policy, which of the following would be covered under Coverage A?
Answer Choices: Select the Correct Answer
A structure attached to the dwelling
A structure detached from the dwelling
Dwelling Contents
Livestock
A structure attached to the dwelling is correct.
EXPLANATION:
Coverage A covers the dwelling and any attached structures such as a garage.
Which of the following coverages is included in a Personal Auto Policy without having to issue an endorsement?
Answer Choices: Select the Correct Answer
Transportation Expenses
Towing and Labor Costs
Miscellaneous Type Vehicles
Named Nonowner
Transportation Expenses.
EXPLANATION:
Transportation expenses are part of the Physical Damage coverage. Some auto policies still provide this coverage only if the vehicle has been stolen.
Which of the following is NOT included in the California Code of Regulations (CCR)?
Answer Choices: Select the Correct Answer
Selling techniques.
Specific requirements for different types of insurance.
Procedural issues related to agent and insurance company practices.
Conduct hearings and investigations.
The correct answer is: Selling techniques. .
EXPLANATION:
Selling techniques are not issues for the California Department of Insurance unless the techniques violate insurance law.
Which commercial property form provides the broadest coverage?
Answer Choices: Select the Correct Answer
Basic form
Broad form
Special form
Deluxe form
Special form is correct.
EXPLANATION:
In commercial property insurance, the insured selects from three different “causes of loss” forms - basic, broad, or special. There is no deluxe form. Basic and broad forms provide named peril protection; special form is all-risk (open-perils), and is therefore the broadest.
The authority the public believes the agent has based on the agent’s actions is known as:
Answer Choices: Select the Correct Answer
Fiduciary Authority
Expressed Authority
Apparent Authority
Implied Authority
Apparent Authority.
EXPLANATION:
Apparent authority is the authority the public believes the agent has which seems to be apparent by the agent’s actions.
In legal terms, the written explanation of how a loss occurred is called a:
Answer Choices: Select the Correct Answer
Loss notification.
Deposition.
Statement.
Proof of loss.
Statement. is correct.
EXPLANATION:
This is a statement. A proof of loss lists the damage for which the insured desires reimbursement.
Under Workers Compensation rules, for an employee to receive Temporary Disability Compensation for the first three (3) days of his disability, his disability period must extend:
Answer Choices: Select the Correct Answer
21 days
30 days
45 days
60 days
21 days is correct.
EXPLANATION:
Benefits are retroactive to the day of the injury if the disability lasts 21 days.
Under the conditions section of the BOP, which of the following would not be considered vacant?
Answer Choices: Select the Correct Answer
A 100 unit apartment building of which 70 units are not rented
An office building containing two empty units and these two empty suites represent 25% of the total floor space.
A mercantile building with a print shop on the ground floor but the second and third floors are not being utilized
A new building which has not been rented out at all
An office building containing two empty units and these two empty suites represent 25% of the total floor space. is correct.
EXPLANATION:
A building is considered vacant when 65% or more of the total floor space is not being utilized or rented out. The office building with two empty suites is only 25% vacant.
A ship has negligently collided with another ship and caused severe damage. What coverage would apply to cover this claim?
Answer Choices: Select the Correct Answer
Hull insurance with the “running down clause”.
Protection and Indemnity.
Inchmaree clause.
Towage clause.
Hull insurance with the “running down clause”. is correct.
EXPLANATION:
Hull insurance with the “running down clause” would respond to cover this claim.
A license issued by the Commissioner that contains certain conditions is called:
Answer Choices: Select the Correct Answer
A restricted license.
A temporary license.
A surplus lines license.
A non-restricted license.
A restricted license. is correct.
EXPLANATION:
A restricted license is a license that is issued by the Commissioner with reasonable restrictions on the license and license holder.
An insured has $500 cash stolen from her home. How much can she collect under a standard homeowner policy?
Answer Choices: Select the Correct Answer
$500
$200
0
$100
The correct answer is: $200.
EXPLANATION:
The standard homeowner policy limits coverage for cash to only $200.
All the following are reasons that a driver would be insured under the assigned risk plan, EXCEPT:
Answer Choices: Select the Correct Answer
They desire to save premium
They are uninsurable in the standard markets
They have had too many claims
They cannot show evidence of satisfying the financial responsibility law of the state
They desire to save premium is correct.
EXPLANATION:
Those drivers with a poor driving records or DUI charges are usually declined by the standard insurance markets. The only auto insurance market for them is the assigned risk plan. The plan is never used to save premium.
All the following are included in the definition of insolvency, EXCEPT:
Answer Choices: Select the Correct Answer
impairment of minimum “paid-in capital” required in the aggregate of an insurer.
the inability of the insurer to meet its financial obligations when they are due.
the revocation of an insurer’s certificate of authority.
the inability of the insurer to fully reinsure all outstanding risks.
the revocation of an insurer’s certificate of authority. is correct.
EXPLANATION:
According to the California Insurance Code (CIC 985), revocation of an insurer’s certificate of authority is not included in the definition of insolvency.
A method of replacing damaged property with something not exactly like the damaged item, but will perform the same is known as:
Answer Choices: Select the Correct Answer
Agreed Replacement Value.
Stated Amount Value.
Functional Replacement Cost.
Replacement Cost.
The correct answer is: Functional Replacement Cost..
EXPLANATION:
Functional replacement cost will replace the damaged item, but with something that might not be exactly the same.
Ocean marine protection and indemnity (P&I) coverage usually insures the ship owner against liability for all of the following EXCEPT:
Answer Choices: Select the Correct Answer
Damage to or loss of another ship caused by a negligent collision.
Injuries to seamen
Cargo lost or damaged through negligence.
Damage to piers.
Damage to or loss of another ship caused by a negligent collision. is correct.
EXPLANATION:
Hull coverage is required to cover the damage to the ship. P&I provides legal liability coverage for injuries and certain types of damages. Damage to another ship is not covered under the P&I coverage. Coverage can be provided under the hull coverage form for this coverage to other vessels. This is called the “running down clause”.
The insured carries a BOP policy with a sprinkler system. If the system becomes inoperative the insured must advise the insurance company of the problem within ______ if the system cannot be restored.
Answer Choices: Select the Correct Answer
60 hours
48 hours
30 hours
75 hours
48 hours is correct.
EXPLANATION:
The insured must advise the insurance company within 48 hours of a protective device becoming inoperable.
Rudy, a licensed California adjuster, has received a letter from a claimant requesting information about a claim. Rudy is required to respond within:
Answer Choices: Select the Correct Answer
30 calendar days.
15 working days.
15 calendar days.
10 days.
15 calendar days. is correct.
EXPLANATION:
Upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee must immediately, but in no event more than 15 calendar days after receipt of that communication, furnish the claimant with a complete response based on the facts as then known by the licensee.
The “when more than one coverage applies” condition in crime insurance is designed to:
Answer Choices: Select the Correct Answer
Specifies how a claim would be allocated among the different insurers.
Allow the insured to choose the company that will pay the claim.
Provide for subrogation of a claim.
Avoid overpayment of a claim.
Specifies how a claim would be allocated among the different insurers. is correct.
EXPLANATION:
The purpose of the clause is to specify how a claim would be allocated among the different insurers.
A large tree has fallen into Paul’s yard caused by wind. The claims service representative advises Paul to call a contractor to remove the tree and send the insurance company the bill. The bill is $1,200. However, the policy coverage for the debris removal of a tree that has fallen by wind is only $500 unless the tree hits the house, which was not the case. What should the adjuster do?
Answer Choices: Select the Correct Answer
Pay only $500
Pay the $1,200
Explain the policy provisions and ask to insured to reimburse the insurer for the difference
Negotiate
Pay the $1,200 is correct.
EXPLANATION:
The consumer relied on the statements of the claims representative so the insurance company would be estopped from denying the claim. The insurer had already waived its right to deny full payment of the claim because of the statements of the claims representative. Therefore, the $1,200 should be paid.
Under the commercial general liability policy, medical payment expenses must be:
Answer Choices: Select the Correct Answer
Reported within one year of the accident.
Paid within one year of the accident.
Reported within two year of the accident.
Paid within three years of the accident
Reported within one year of the accident. is correct.
EXPLANATION:
It is required in the policy that the expenses are incurred and reported to the insurer within one (1) year of the date of the accident.
Which of the following perils are covered under Section I of the homeowners form?
Answer Choices: Select the Correct Answer
Physical injury to a guest hurt on the residence premises
First Aid expenses
Theft of credit or funds transfer cards
Intentional damage to the property of others
The correct answer is: Theft of credit or funds transfer cards.
EXPLANATION:
Section I coverages are the property coverages. Section II provides liability and medical payments coverage. The theft of the credit or funds transfer cards are covered property up to a limit of $500.
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:
Answer Choices: Select the Correct Answer
Attachment bond.
Indemnity bond.
Performance bond.
Replevin bond.
The correct answer is: Replevin bond..
EXPLANATION:
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.
For how long must an adjusting firm maintain its claim files?
Answer Choices: Select the Correct Answer
For as long as any statute of limitations
For the current year and 10 prior years
For the current year and 4 prior years
For the current year only
For the current year and 4 prior years is correct.
EXPLANATION:
Per the California DOI, adjusting firms must maintain files for the current policy year and the preceding four years, at the company’s principal place of business.
The focus of the Equipment Breakdown coverage is:
Answer Choices: Select the Correct Answer
Prevention of loss
Protection from loss
To provide extra coverage over the property policy
To reinforce the explosion and fire perils
The correct answer is: Prevention of loss.
EXPLANATION:
The main focus of this coverage is to prevent loss rather then protection from loss. Proper maintenance of the equipment is required and inspections will be performed to help prevent losses.
How are crop insurance premiums calculated?
Answer Choices: Select the Correct Answer
Number of fields
Number of crops
Number of acres
Per farm
Number of acres is correct.
EXPLANATION:
Crop insurance is based on acreage for each crop.
Which of the following is not an implied warranty under an ocean marine policy?
Answer Choices: Select the Correct Answer
Seaworthiness of the vessel
Legality
No deviation in the voyage
Protection and indemnity
Protection and indemnity is correct.
EXPLANATION:
Protection and indemnity is a form of ocean marine liability coverage and is not an implied warranty.
In California a lawsuit for bodily injury must be brought within:
Answer Choices: Select the Correct Answer
Five years from the date of the loss
180 days from the date of the loss
Two years from the date of the loss
Three years from the date of the loss
Two years from the date of the loss is correct.
EXPLANATION:
The lawsuit must be brought within two years of the date of the loss.
A business owner who is careless about property left in his care may be guilty of which of the following hazards:
Answer Choices: Select the Correct Answer
Morale.
Moral.
Catastrophic.
Occupational.
Morale. is correct.
EXPLANATION:
A morale hazard is one created by carelessness or indifference, the failure to exercise due care. A moral hazard is one deliberately created by an insured party willing to trade a loss for a claim payment.
With an Equipment Breakdown policy, the loss settlement is:
Answer Choices: Select the Correct Answer
ACV all of the time
Replacement cost all of the time
Replacement cost if the repair or replacement is made within 18 months
Replacement cost if the repair or replacement is made within 24 months
The correct answer is: Replacement cost if the repair or replacement is made within 24 months.
EXPLANATION:
The insured must repair or replace the damaged property within 24 months after the date of the breakdown (unless the time period is extended by the insurer in writing), or recovery of the loss is limited to the lesser of the cost it would have taken to repair the damaged property or the actual cash value of the property at the time of the breakdown. Usually coverage is on a replacement cost basis unless the insured or company endorses the policy to cover losses on an Actual Cash value bases. If replacement cost coverage applies, then the 24-month period is a factor if the insured is to receive replacement cost coverage for the loss.
