IA Test 1 Flashcards
QUESTION:
An insured has a $2 million limit of insurance under a Personal Umbrella policy with a $2,000 self-insured retention limit. The insured is sued for $1 million in personal injury damages and $1.5 million in property damages arising from the same occurrence. The insured’s underlying liability policies exclude coverage in this case, but the claim is covered under the Umbrella policy. In this case, the umbrella policy will pay:
Answer Choices: Select the Correct Answer $1 million of the damages. $1,998,000 of the damages. $2 million of the damages. $2,500,000 of the damages.
Question 1 of 100
Your answer: $1,998,000 of the damages. is correct.
EXPLANATION:
Since the underlying coverage does not apply the insured must pay the $2,000 self-insured retention limit and the Umbrella insurer must pay the rest of the claim.
No insurer may issue checks or drafts or partial settlement of a loss or claim that is still being negotiated that:
Answer Choices: Select the Correct Answer
Releases the insurer from additional liability.
Releases the insurer unless the policy or bond limit has been paid.
Releases the insurer unless a compromise has been made.
Releases the insurer from liability in one instance but leaves open future demands for payment in an agreement agreed to by all interested parties.
Question 2 of 100
Your answer: Releases the insurer from additional liability. is correct.
EXPLANATION:
An insurer cannot issue a check for partial payment of a claim that contains language that releases the insurer from total liability unless the limit of the policy or the bond has been paid or a compromise has been otherwise made.
Under the HO-3 form there is no coverage for loss resulting from “earth movement” except when endorsed by which of the following?
Answer Choices: Select the Correct Answer Earthquake endorsement. Volcanic eruption endorsement. Collapse endorsement. Explosion endorsement.
Question 3 of 100
Your answer: Earthquake endorsement. is correct.
EXPLANATION:
An insured may add earthquake as an insured peril for Coverages A, B and C by adding the earthquake endorsement. This endorsement defines as a “single earthquake” all earthquake shocks occurring within a 72-hour period. The peril of earthquake is defined to include land shock waves or tremors accompanying a volcanic eruption.
Question 3 of 100
Under “pollution cleanup and removal” coverage under the standard ISO BOP form, when must a loss be reported?
Answer Choices: Select the Correct Answer Within 180 days Within 60 days Immediately Within 90 days
Question 4 of 100
The correct answer is: Within 180 days.
EXPLANATION:
The expenses will be paid only if they are reported to the insurer within 180 days of the date of the direct loss or by the end of the policy period, whichever is earlier.
Question 4 of 100
Under a Commercial Auto policy with respect to physical damage to a covered vehicle, which of the following is true regarding diminution of value?
Answer Choices: Select the Correct Answer
It is specifically excluded.
It is covered.
The deductible is waived.
The renewal premium is reduced for physical damage coverages on the damaged vehicle.
Question 5 of 100
The correct answer is: It is specifically excluded..
EXPLANATION:
A decrease in the value because of an accident is not a covered loss in most states. The policy excludes this decrease in value when a covered vehicle has been damaged and causes a decrease in value even though it has been repaired.
Question 5 of 100
Which of the following is NOT excluded under Section II - Liability of the Businessowners policy?
Answer Choices: Select the Correct Answer
Aircraft, auto or watercraft bodily injury
Professional services bodily injury
Pollution property damage
Valet services bodily injury
Question 6 of 100
Your answer: Valet services bodily injury is correct.
EXPLANATION:
Coverage is included for valet service bodily injury claims. However, the coverage only applies to the ways and means of the insured’s premises that are owned or rented and not when the valet service is operating the vehicle on public roads. The vehicle must be one that is not owned, rented or loaned to the insured. Coverage is the same in the general liability form.
Question 6 of 100
All of the following are “advertisements” as defined by the California Code of Regulations (CCR), EXCEPT:
Answer Choices: Select the Correct Answer
Any written or printed communication for the purpose of soliciting, describing, or promoting the licensed business of the licensee, including a brochure, letter, pamphlet, newspaper, periodical, publication, or other writing.
A directory listing caused or permitted by the licensee that also indicates his licensed activity.
Any printing or writing on buildings used as the licensee’s place of business or branch office.
A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee.
Question 7 of 100
The correct answer is: Any printing or writing on buildings used as the licensee’s place of business or branch office..
EXPLANATION:
“Any printing or writing on buildings used as the licensee’s place of business or branch office” is actually listed as NOT being included in the definition of “advertisement”. All the other answer choices ARE considered “advertisements” according to the CCR. (CCR 2691.17)
Question 7 of 100
The California Standard Fire policy contains all the following, EXCEPT:
Answer Choices: Select the Correct Answer Name of the insurance company. The amount of coverage. The address of the insured. The premium being charged.
Question 8 of 100
The correct answer is: The address of the insured..
EXPLANATION:
According to the California Insurance Code (CIC 2070-2084), the California Standard Fire policy does not include the address of the insured.
Question 8 of 100
The Ordinance or Law Exclusion would be applicable to which of the following situations?
Answer Choices: Select the Correct Answer
A new ordinance requires two emergency exits from all new homes, and a recently-destroyed home did not previously have them.
A local ordinance requires repairs to a dwelling to begin within 60 days of the date of damage.
A law enforcement officer requires a homeowner to immediately clear debris from a demolished dwelling.
California insurance laws force homeowners to notify their insurers of claims within five working days of the loss.
Question 9 of 100
The correct answer is: A new ordinance requires two emergency exits from all new homes, and a recently-destroyed home did not previously have them..
EXPLANATION:
The Ordinance or Law Exclusion denies payment for upgrades that are required by ordinance or law to be made to a damaged building. The newer dwelling and HO forms include a limited amount of additional coverage for new building codes that relate to reconstruction.
Question 9 of 100
In workers compensation the term “willful” means which of the following?
Answer Choices: Select the Correct Answer Unsupervised Negligent With good reason Intentional
Question 10 of 100
Your answer: Intentional is correct.
EXPLANATION:
The terms “willful” and “intentional” are synonymous.
Question 10 of 100
Which of the following would not be addressed by a court in the determination of a declaratory judgment?
Answer Choices: Select the Correct Answer
Determine if a particular exclusion would apply
Determine if a particular insuring agreement would apply
Determine fault or monetary damages
Determine if other insurance policies apply
Question 11 of 100
Your answer: Determine fault or monetary damages is correct.
EXPLANATION:
The court would not determine the fault or monetary judgment in the determination of a declaratory judgment.
Question 11 of 100
Which is false regarding the California Good Driver Discount?
Answer Choices: Select the Correct Answer
A person must have maintained at least a “B” average in high school.
It shall be at least 20% below the rate the insured would otherwise be charged.
A driver does not have to prior coverage in force to receive the discount.
An insurer may refuse the discount for motorcycles in some cases.
Question 12 of 100
The correct answer is: A person must have maintained at least a “B” average in high school. .
EXPLANATION:
To qualify for the discount, a driver does not have to be a student.
Question 12 of 100
A person may be negligent if he or she:
Answer Choices: Select the Correct Answer
Fails to do what a reasonable and prudent person would do.
Injures another person even though he acted prudently.
Commits a deliberate act that injures another.
Hires someone to damage another’s property.
Question 13 of 100
Your answer: Fails to do what a reasonable and prudent person would do. is correct.
EXPLANATION:
This is the most widely accepted definition of negligence. Often times it is up to a jury to determine if the acts committed by the defendant were negligent.
Question 13 of 100
The Dye family hosts a party. When the guests arrive, they place their coats in the bedroom. Two days later, Mr. Dye discovers that his ring is missing from the dresser. This loss is referred to as a:
Answer Choices: Select the Correct Answer Mysterious disappearance. Burglary. Robbery. Theft.
Question 14 of 100
Your answer: Theft. is incorrect. The correct answer is: Mysterious disappearance. .
EXPLANATION:
This is an example of a mysterious disappearance which can be a presumption of theft. Property is missing from a known place where the property should be.
Question 14 of 100
The “pollution” exclusion of the Commercial General Liability policy would rule out coverage in which of the following situations?
I. It is discovered that gradual leakage from storage tanks of a chemical plant have finally polluted a community’s drinking water to the point where illnesses can be attributed to it.
II. A ruptured vent at an incineration plant causes a sudden emission of pollutants into the air.
III. A manufacturer is held liable for the cost of cleaning up a river that has been polluted by emissions from the manufacturer’s operations.
Answer Choices: Select the Correct Answer II only I and II only II and III only I, II and III
Question 15 of 100
Your answer: I, II and III is correct.
EXPLANATION:
The policy provides a very broad exclusion for pollution events. A separate Pollution Liability policy is required to cover these situations.
Question 15 of 100
Choose the correct method an insurer must use when cancelling a worker’s compensation policy.
Answer Choices: Select the Correct Answer
Must use the standard policy provision which is to provide the employer a 90-day notice
Must comply with the provisions of the NAIC (National Association of Insurance Commissioners)
Must be done in specific conformity with the individual state laws
Must obtain the approval of the state’s worker compensation commissioner with the specific reasons for the action
Question 16 of 100
The correct answer is: Must be done in specific conformity with the individual state laws.
EXPLANATION:
Cancellation and non-renewal of a worker’s compensation insurance policy must be done in specific conformity with the law or the coverage could be extended beyond the intent of the carrier. In an effort to provide a claimant with a source to get his claim paid, coverage is going to be found to remain in effect unless the carrier has precisely complied with the law regarding notice to the insured and the Worker’s Compensation Commission when cancelling or non-renewing the coverage.
Question 16 of 100
Under a standard Equipment Breakdown policy, the loss settlement is:
Answer Choices: Select the Correct Answer
ACV for all covered losses if the the claim is reported within 24 months.
Replacement cost for all covered losses.
Replacement cost coverage, if the repair or replacement, is made within 18 months of the loss.
Replacement cost coverage, if the repair or replacement, is made within 24 months of the loss.
Question 17 of 100
The correct answer is: Replacement cost coverage, if the repair or replacement, is made within 24 months of the loss..
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.
Question 17 of 100
A company’s promise to “pay for damage caused by or resulting from any covered cause of loss” would be found in which of the following sections of an insurance policy?
Answer Choices: Select the Correct Answer Insuring Agreement Declarations Conditions Exclusions
Question 18 of 100
Your answer: Declarations is incorrect. The correct answer is: Insuring Agreement.
EXPLANATION:
The perils covered are found in one of the three “cause of loss” forms that are a part of the insuring agreement.
Question 18 of 100
Mr. Smith’s bicycle shop enters into many written and oral agreements with customers. Mr. Smith’s agent informs him that the liability on his BOP contains:
Answer Choices: Select the Correct Answer
Products and Completed Operations Liability
Contractual Liability
Fidelity Bond
Premises and Operations Liability
Question 19 of 100
The correct answer is: Contractual Liability.
EXPLANATION:
Like the CGL policy, the liability section of the BOP contains coverage for the written and oral agreements for “insured contracts” in which the insured enters. This coverage is known as “Contractual Liability”.
Question 19 of 100
As an independent adjuster in California, your investigation of a two-car traffic accident indicates that both drivers are equally at fault. After speaking with the claimant’s adjuster the two of you agree that both drivers are equally to blame. Your subrogation demand would be for:
Answer Choices: Select the Correct Answer
100% of your insured’s damages as your analysis does not affect what is owed by the other party.
75% of your insured’s damages as each side’s 25% totals 50%.
50% of your insured’s damage, because the insured and the other driver were both 50% at fault.
Nothing. Because both drivers were 50% at fault, each insurance company will pay 100% of the claim on their own insured’s damages.
Question 20 of 100
The correct answer is: 50% of your insured’s damage, because the insured and the other driver were both 50% at fault..
EXPLANATION:
California is a “comparative negligence” state. In California the person most at fault is deemed to be the primary cause of the accident. If investigation either by law enforcement or the insurance adjuster determines that there was “comparative negligence” on the part of the other driver(s), all damages owed are subject to apportionment.
Question 20 of 100
In California, a Homeowners policy may be cancelled during the 60-day underwriting period, and for the reasons acceptable by law, if a notice of _____ is provided to the insured.
Answer Choices: Select the Correct Answer 20 days. 30 days. 45 days. 10 days.
Question 21 of 100
Your answer: 10 days. is incorrect. The correct answer is: 20 days..
EXPLANATION:
In California, when a Homeowners policy is still within the 60-day underwriting period, the insurance company can cancel the policy if a 20-day notice is provided to the insured.
Question 21 of 100
Mary intentionally trips her neighbor while the neighbor is trespassing on the insured’s property. Although the neighbor is not injured, Mary gives the neighbor $500 in cash to settle any potential liability claim. How will Mary’s insurance company most likely respond in this situation?
Answer Choices: Select the Correct Answer
The insurer will reimburse Mary for the entire $500.
The insurer will reimburse Mary for $500, less any applicable deductible.
The insurer will sue the neighbor for the return of the $500 because the neighbor was not injured.
The insurer will deny liability coverage because Mary’s action was intentional.
Question 22 of 100
Your answer: The insurer will deny liability coverage because Mary’s action was intentional. is correct.
EXPLANATION:
Intentional acts are excluded and the company will deny the claim. The only exception to this exclusion is when the insured is attempting to use reasonable force to protect themselves or their property.
Question 22 of 100
An insured has her business automobiles covered under a Business Auto policy with Symbol 7 specified on her Declarations page. She has purchased a trailer with a load capacity of 2,500 pounds and hitched it to a covered van. While she is driving the van, the trailer breaks free and crashes into another vehicle, causing bodily injury. Which of the following statements is true regarding this insured’s situation?
Answer Choices: Select the Correct Answer
Liability coverage is extended under Symbol 7 for a trailer with a load capacity of less than 5,000 pounds, therefore coverage will apply.
Liability coverage is not extended under Symbol 7 for a trailer with a load capacity of more than 2,000 pounds, therefore coverage will not apply.
Liability coverage is excluded for all trailers under the Business Auto Coverage form.
Liability coverage will not apply for the trailer, but coverage for the van will pay the damages awarded under the lawsuit.
Question 23 of 100
The correct answer is: Liability coverage is not extended under Symbol 7 for a trailer with a load capacity of more than 2,000 pounds, therefore coverage will not apply..
EXPLANATION:
Liability coverage is not extended under Symbol 7 for a trailer with a load capacity of more than 2,000 pounds, therefore coverage will not apply because the load capacity of the trailer in the question is listed at a load capacity of 2,500 pounds.
Question 23 of 100
A contractor applying for Workers Compensation insurance has traditionally worked in only one state, but is now bidding for work in several surrounding states. What provisions of the Workers Compensation policy address this contractor’s loss exposures that might develop during the policy period in these new states?
Answer Choices: Select the Correct Answer
There are no provisions for these exposures; the contractor must add the coverage by endorsement before starting work in any new state.
Part III - Other States insurance
Monopolistic state funds clause
New States Added clause
Question 24 of 100
The correct answer is: Part III - Other States insurance.
EXPLANATION:
Part III - Other States Insurance of the Workers Compensation policy applies to both workers compensation coverage and employers liability insurance. The purpose of “other states insurance” is to provide coverage for loss exposures that develop during the policy period, in any state designated in Part 3C of the information page of the policy. Therefore, the contractor in this question should indicate on the Workers Compensation application the new states that it is bidding work in. These states would then be shown in Part 3C of the information page, and if exposure develops in those states (that is, if the contractor begins working there), coverage will be automatically provided. The insurer will collect premium via the payroll audit performed after policy expiration.
Question 24 of 100
Under a surety bond, the “principal” is the party that:
Answer Choices: Select the Correct Answer
Agrees to fulfill an obligation.
Agrees to pay damages if default occurs.
Provides the bond in exchange for a fee.
Will be paid damages if default occurs.
Question 25 of 100
Submit
The correct answer is: Agrees to fulfill an obligation. .
EXPLANATION:
The bond guarantees the performance of the principal. A building contractor would be an example of a principal under a performance bond.
Question 25 of 100
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:
Answer Choices: Select the Correct Answer
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.
Question 26 of 100
The correct answer is: Excluded before that date. .
EXPLANATION:
The retroactive date is the date that claims-made coverage begins. Claims before that date are excluded by the policy.
Question 26 of 100
Which of the following watercraft losses are excluded under a homeowner policy? I. Theft off the residence premises II. Windstorm damage while the insured’s boat is docked at the marina III. Fading of the canvas tarp which covers a boat IV. Earthquake damage
Answer Choices: Select the Correct Answer I and II only I, II, and IV only I, II, III, and IV I, II, and III only
Question 27 of 100
Your answer: I, II, III, and IV is correct.
EXPLANATION:
Homeowner policies have specific limits and exclusions applying to watercraft. Whereas earthquake damage to and fading of ANY property would be excluded (because fading is inevitable and not accidental)theft of watercraft off-premises and windstorm damage to a boat that is not in an enclosed building are specifically excluded.
Question 27 of 100
Homeowner policies typically provide coverage for all of the following, EXCEPT:
Answer Choices: Select the Correct Answer Personal liability Personal injury Claim expenses Medical payments
Question 28 of 100
The correct answer is: Personal injury.
EXPLANATION:
Personal injury covers libel, slander, wrongful eviction and several other coverages. The standard homeowner policy must be endorsed to provide personal injury coverage.
Question 28 of 100
If the Merlin Construction Company does not properly protect a job site, the public could be injured. This is an example of:
Answer Choices: Select the Correct Answer Negligence. Negligible injury. Negotiable injury. Intentional injury.
Question 29 of 100
Your answer: Negligence. is correct.
EXPLANATION:
Negligence is the failure of a duty. If a contractor fails in his/her duty to properly protect the public from injuries or damage that can occur on his/her job site, the contractor would be guilty of negligence.
Question 29 of 100
How soon must a change in the qualified manager of an adjusting firm be reported to the California Department of Insurance?
Answer Choices: Select the Correct Answer Within one year Within 30 days Immediately Does not have to be reported
Question 30 of 100
Your answer: Within 30 days is correct.
EXPLANATION:
A change in the qualified manager, branch manager, officer or partner must be reported to the DOI within 30 days of the change.
Question 30 of 100
Under the livestock coverage form, within how many days must newly acquired livestock be added to the policy?
Answer Choices: Select the Correct Answer Within 30 days of purchase Immediately Within 10 days of purchase With 5 days of purchase
Question 31 of 100
The correct answer is: Within 30 days of purchase.
EXPLANATION:
Newly acquired livestock must be reported to the insurance company within 30 days of acquisition, at which time an additional premium will be charged the insured.
Question 31 of 100
A main street business has suffered an explosion loss from a hot water heating boiler. The civil authorities have blocked off the street and the insured’s customers cannot get to his store. The insured carries a Businessowners policy. He sustains a loss of income. Before his policy will pay any loss of income there is a _____ waiting period and the policy will then pay for loss of income up to _____ .
Answer Choices: Select the Correct Answer 72 hours / four weeks 24 hours / two weeks 12 hours / four weeks 48 hours / three weeks
Question 32 of 100
Your answer: 72 hours / four weeks is correct.
EXPLANATION:
This coverage is known as “Contingent Business Income” coverage. The policy has a 72-hour waiting period before coverage will pay. It will pay for loss of income for up to four weeks or until the expiration date of the policy whichever is earlier.
Question 32 of 100
A maid in a hotel neglects to lock a guest’s hotel room door after cleaning the room. Thieves enter the room and steal the guest’s clothing and laptop. What Commercial Crime coverage does the hotel need to cover the loss?
Answer Choices: Select the Correct Answer Kidnap/Ransom Extortion Employee Theft Guest's Property Computer Fraud
Question 33 of 100
Your answer: Guest’s Property is correct.
EXPLANATION:
The Commercial Crime form known as “Guests Property” would cover the loss to guest’s property inside the premises of the hotel.
Question 33 of 100
Proceeds from a commercial property insurance policy can be assigned by:
Answer Choices: Select the Correct Answer
No one because assignment is forbidden by the policy
The policyholder
The mortgagee
The loss payee
Question 34 of 100
The correct answer is: The policyholder.
EXPLANATION:
This is not an “assignment of the policy” but simply a directive as to benefit disbursements.
Question 34 of 100
In California an independent adjuster must post a surety bond. The bond is made payable to:
Answer Choices: Select the Correct Answer The people of the State of California. The Insurance Commissioner. The California Underinsurance Fund. The insurer that employs the adjuster.
Question 35 of 100
The correct answer is: The people of the State of California..
EXPLANATION:
The bond is made payable to the people of the State of California.
Question 35 of 100
A church has had the woodwork in the building refinished and new stain and varnish has been applied. The workers placed the rags and brushes that were used to apply the varnish in a small closet and closed the door, creating the possibility of spontaneous combustion. Which of the following terms best describes this condition?
Answer Choices: Select the Correct Answer Catastrophe Hazard Risk Peril
Question 36 of 100
Your answer: Hazard is correct.
EXPLANATION:
This condition is a hazard, any condition that increases the possibility or severity of a loss.
Question 36 of 100
An insured carries a Personal Property Replacement Cost endorsement attached to her Homeowners policy and has suffered a loss to her personal property. The insured submits a claim for actual cash value (ACV) at the time of the loss, but she intends to make a claim for replacement cost later. What is the time frame in which the insured must notify the insurer that she intends to make the replacement cost claim later?
Answer Choices: Select the Correct Answer Within 120 days of the loss. Within 180 days of the loss. Within 90 days of the loss. Within 30 days of the loss.
Question 37 of 100
Your answer: Within 180 days of the loss. is correct.
EXPLANATION:
The insured must notify the insured within 180 days of the loss of their intention to seek replacement cost coverage at a later date.
Question 37 of 100
For a first-party uninsured motorist claim in California, how many days notification must an insurer give if the statute of limitations on filing a claim is about to expire?
Answer Choices: Select the Correct Answer 60 days 30 days No notice is required. 45 days
Question 38 of 100
Your answer: 30 days is correct.
EXPLANATION:
For pending claims, the insurer must provide written notice to any first-party uninsured motorists claimant at least 30 days before the expiration date of the statute of limitations.
Question 38 of 100
According to the Definitions section of a homeowner policy, the term best described by the phrase an “unforeseen and unintended” event is a/an:
Answer Choices: Select the Correct Answer Accident Peril Hazard Risk
Question 39 of 100
Your answer: Accident is correct.
EXPLANATION:
This is the definition of an accident.
Question 39 of 100
The standard deductible on the Commercial Property Earthquake Causes of Loss form is:
Answer Choices: Select the Correct Answer A percentage of the loss. $1,000. $5,000. A percentage of the building value.
Question 40 of 100
Your answer: A percentage of the building value. is correct.
EXPLANATION:
The deductible will be the percentage shown in the Declarations times the limit of insurance for each type of covered property.
Question 40 of 100
Submit
