IA Test 11 Flashcards
An insured has an NFIP policy and suffers a direct loss due to flood. How many days does the insured have to submit a proof of loss?
Answer Choices: Select the Correct Answer 90 days. 45 days. 60 days. 30 days.
Question 1 of 100
Your answer: 90 days. is incorrect. The correct answer is: 60 days..
EXPLANATION:
An NFIP policy requires that the proof of loss be submitted within 60 days of the loss.
Question 1 of 100
The principle of indemnity is illustrated by which of the following?
Answer Choices: Select the Correct Answer
Restores an insured to the same condition enjoyed before a loss
Allows an insured to profit from a loss
Limits recovery to actual cash value
Requires an insured to assign any rights of recovery against a third party
Question 2 of 100
Your answer: Restores an insured to the same condition enjoyed before a loss is correct.
EXPLANATION:
It is not intended for a claimant to profit from insurance. The purpose of insurance is to attempt to restore the person to the status enjoyed prior to the loss.
Question 2 of 100
What type of coverage would a heating and cooling contractor need when work has been done on a newly renovated building but not yet accepted by the owner?
Answer Choices: Select the Correct Answer An Installation Floater A Builder’s Risk Policy A Bailee Form of Coverage A Transportation Floater
Question 3 of 100
Your answer: An Installation Floater is correct.
EXPLANATION:
The contractor would need an installation floater that provides property coverages for work performed until accepted by the owner.
Question 3 of 100
The insured is a CPA and has the accounting tax records of several clients on the premises. If the records were suddenly destroyed by fire, what inland marine form would cover the cost to reproduce them?
Answer Choices: Select the Correct Answer Valuable papers and records Accounts Receivable Coverage EDP Coverage A Bailee Form
Question 4 of 100
Your answer: EDP Coverage is incorrect. The correct answer is: Valuable papers and records.
EXPLANATION:
The purpose of the valuable papers and records form is to pay for the cost of reproducing destroyed valuable papers and records.
Question 4 of 100
A tornado blows over a wall of a barn which, in turn, knocks over a lamp and starts a fire. What is the proximate cause of loss?
Your answer: Tornado is correct.
EXPLANATION:
The proximate cause of loss would be the tornado (wind).
Question 5 of 100
When Commercial General Liability “claims made” coverage is written, a “laser beam” endorsement may be used to:
Answer Choices: Select the Correct Answer
Exclude specific accidents, products, work, or locations.
Provide special coverage for certain high technology risks.
Provide coverage for certain types of nuclear hazards.
Add special conditions applicable to defense contractors.
Question 6 of 100
When Commercial General Liability “claims made” coverage is written, a “laser beam” endorsement may be used to:
Your answer: Exclude specific accidents, products, work, or locations. is correct.
EXPLANATION:
The “laser beam” endorsement is used to exclude risks or hazards that the insurer does not wish to insure. It is used exclusively on the “claims made” CGL form.
Question 6 of 100
Which of the following scenarios would fall under the scope of the “Products Liability” section of a CGL policy?
Answer Choices: Select the Correct Answer
A visitor to a business steps on a nail.
A driver for Maid-Your-Day cleaning services causes an accident when she runs a stop sign.
An exercise machine snaps a belt, injuring a consumer in a sporting good store.
A team of contractor’s employees install a toilet in the wrong area of a bathroom.
Question 7 of 100
our answer: A team of contractor’s employees install a toilet in the wrong area of a bathroom. is incorrect. The correct answer is: An exercise machine snaps a belt, injuring a consumer in a sporting good store..
EXPLANATION:
Product liability covers injuries or damage caused by a faulty product. The exercise machine is faulty. The other three choices have nothing to do with a faulty product.
Question 7 of 100
Which of the following are covered under the Homeowners “Additional Residence Rented to Others” endorsement?
I. Personal Liability (Injury)
II. Medical Payment to Others
III. Dwelling
IV. Personal Property
Answer Choices: Select the Correct Answer I and II only. I, II, III and IV. I and IV only. III and IV only.
Question 8 of 100
Your answer: III and IV only. is incorrect. The correct answer is: I and II only..
EXPLANATION:
The “Additional Residence Rented to Others” endorsement provides personal liability (injury) and medical payments to others coverage to cover the insured’s liability arising out of the ownership of a residence regularly rented to others.
Question 8 of 100
An independent adjuster must complete ___ hours of continuing education during each license renewal cycle.
Answer Choices: Select the Correct Answer 12 20 24 36
Question 9 of 100
Your answer: 24 is correct.
EXPLANATION:
An individual who holds an insurance adjuster license and who is not exempt must satisfactorily complete a minimum of 24 hours, of which three hours are to be in ethics, of continuing education courses pertinent to the duties and responsibilities of an insurance adjuster license reported to the Insurance Commissioner on a biennial basis in conjunction with his or her license renewal cycle.
Question 9 of 100
The Homeowners policy provides a special limit for Damage to Property of Others in the Section II (liability) Additional Coverages of:
Answer Choices: Select the Correct Answer $500. $250. $1,000. $2,000.
Question 10 of 100
Your answer: $2,000. is incorrect. The correct answer is: $1,000..
EXPLANATION:
This coverage has been increased to $1,000.
Question 10 of 100
Which of the following is NOT a claim settlement option for liability claims?
Answer Choices: Select the Correct Answer Excessive amounts claimed. Lost wages claimed. Loss of Use. Disfigurement.
Question 11 of 100
Your answer: Excessive amounts claimed. is correct.
EXPLANATION:
Excessive amounts claimed are always contested by the insurer. Liability losses are categorized as “special damages”or “general damages.” Special damages include medical expenses and loss of wages or the costs of other known expenses. General damages would include pain and suffering, punitive damages, loss of consortium, disfigurement and disability claims.
Question 11 of 100
Which of the following perils is not covered under the Commercial Property Basic Cause of Loss form:
Answer Choices: Select the Correct Answer
Collapse (other than sinkhole collapse).
Sprinkler leakage
Explosion
Sinkhole collapse
Question 12 of 100
Your answer: Sprinkler leakage is incorrect. The correct answer is: Collapse (other than sinkhole collapse)..
EXPLANATION:
The Basic Form does not cover collapse except sinkhole collapse.
Question 12 of 100
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 13 of 100
Your answer: $1 million of the damages. is incorrect. The correct answer is: $1,998,000 of the damages..
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.
Question 13 of 100
Contractor Joe has borrowed funds from a bank in order to finance a construction project. A surety bond which guarantees the lender that the contractor will use the borrowed funds to finish the contract free and clear of liens is known as a:
Answer Choices: Select the Correct Answer Bid bond. Performance bond. Labor and materials bond. Completion bond.
Question 14 of 100
Your answer: Completion bond. is correct.
EXPLANATION:
A completion bond guarantees the lending party of the funds that the borrowed funds will be used only for this work or project, and the work will be delivered free and clear of liens.
Question 14 of 100
All of the following would be excluded under Coverage D - Physical Damage of a Personal Automobile Policy, EXCEPT:
Answer Choices: Select the Correct Answer
Permanently-installed GPS systems.
Radar or laser detection equipment.
Camper bodies or trailers owned by the named insured but not listed on the declarations page.
Custom furnishings or equipment in a van.
Question 15 of 100
Your answer: Permanently-installed GPS systems. is correct.
EXPLANATION:
Permanently installed electronic equipment such as sound systems and GPS devices are covered, but no custom equipment is covered in a van unless an endorsement for this coverage is attached to the policy and an additional premium is paid. (Remember, radar detectors are excluded.)
Question 15 of 100
QUESTION:
Which of the following zones is not expected to flood during the “base flood”?
Your answer: X zones. is correct.
EXPLANATION:
X zones are not expected to flood during the base flood.
Question 16 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 17 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 17 of 100
Under the farm forms, a “half a head” of livestock is an animal that is:
Answer Choices: Select the Correct Answer
Under three years of age and the most coverage that will be paid for that animal under the policy is $3,000.
Under two yeara of age and the most coverage that will be paid for that animal under the policy is $2,500.
Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000.
Is under six months of age and the most coverage that will be paid for that animal under the policy is $500.
Question 18 of 100
Your answer: Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000. is correct.
EXPLANATION:
An animal under one year of age, is known as a “half a head.” Coverage F covers farm personal property on a blanket basis both on and off the insured premises. A blanket limit for livestock can be added, however, the most that will be paid for “half a head” of livestock (an animal under one year of age) is $1,000.
Question 18 of 100
An insured purchases two homeowner policies from two different insurance companies. If a covered loss occurs, on what basis will the loss be settled by each of the insurers?
Answer Choices: Select the Correct Answer First policy effective basis Excess basis Equal share basis Pro rata basis
Question 19 of 100
Your answer: Equal share basis is incorrect. The correct answer is: Pro rata basis.
EXPLANATION:
Each company will pay its pro-rata share of the loss. This means the percentage of coverage (the total amount of insurance carried) that each company provides on the risk.
Question 19 of 100
Under a commercial inland marine form, which of the following is true regarding the appraisal clause?
Answer Choices: Select the Correct Answer
The insurer is bound by the decision of the appraisers or umpire
It is not binding to all parties
The insurer is not bound by the appraisal clause
The insurer must seek legal action under the appraisal clause to enforce the terms and conditions
Question 20 of 100
Your answer: The insurer is bound by the decision of the appraisers or umpire is correct.
EXPLANATION:
The insurer is bound by the outcome of a an appraisal on the damaged property as to it’s value. They still reserve the right to deny the claim if there is a coverage, rather than a valuation question.
Question 20 of 100
Coverage G under the Farm forms covers which of the following?
Answer Choices: Select the Correct Answer
Covers barns, silos, fences
Covers unscheduled personal farm property
Covers scheduled personal property
Covers blanket buildings and contents
Question 21 of 100
Your answer: Covers blanket buildings and contents is incorrect. The correct answer is: Covers barns, silos, fences.
EXPLANATION:
Coverage G covers barns, outbuildings such as silos, fences, radio equipment and other farm structures that are not related to the dwelling.
Question 21 of 100
Your answer: Covers blanket buildings and contents is incorrect. The correct answer is: Covers barns, silos, fences.
EXPLANATION:
Coverage G covers barns, outbuildings such as silos, fences, radio equipment and other farm structures that are not related to the dwelling.
Question 21 of 100
Your answer: Accounts Receivable for uncollectible accounts is incorrect. The correct answer is: Customer signs in their care custody and control.
EXPLANATION:
The Sign Coverage Form will cover the neon, electrical, and mechanical signs of others that in the care, custody and control of the insured.
Question 22 of 100
Which of the following does not have to be included in the inspection report required to participate in the California Fair Access to Insurance Requirements (FAIR) Plan?
Answer Choices: Select the Correct Answer Structural inspection Condition of surrounding structures Occupancy features Photographs of the occupants
Question 23 of 100
Your answer: Photographs of the occupants is correct.
EXPLANATION:
According to the California Insurance Code (CIC 10093(b)), the inspection must include, but need not be limited to, pertinent structural and occupancy features as well as the general condition of the building and surrounding structures. A representative photograph of the property may be taken as part of the inspection.
Question 23 of 100
Which of the following would be considered a consequential loss under a homeowner policy?
Answer Choices: Select the Correct Answer
Water damage to a house as a result of a fire
A tree falling on the roof and a branch breaks a window
Food spoilage in a freezer as a result of a fire in the house
Smoke damage to a detached garage as a result of a fire
Question 24 of 100
Your answer: Water damage to a house as a result of a fire is incorrect. The correct answer is: Food spoilage in a freezer as a result of a fire in the house.
EXPLANATION:
The food spoilage as a result of a covered peril cutting off the electricity would be an example of a consequential loss.
Question 24 of 100
Who is an insured under the liability section of a Farm insurance policy?
Answer Choices: Select the Correct Answer
A retail feed store employee.
A representative from a farm chemical company.
A roadside farm stand employee.
A custom farming employee hired to plow the insured’s fields under contract.
Question 25 of 100
Your answer: A custom farming employee hired to plow the insured’s fields under contract. is incorrect. The correct answer is: A roadside farm stand employee..
EXPLANATION:
A farm employee is covered while acting within the scope of their duties. Farming includes the incidental operation of roadside stands where farm products principally produced by the insured are sold.
Question 25 of 100
Herb has a duplex covered under an HO-8 form in California. The property is damaged by an insured peril that falls under the status of a declared state of emergency. Herb realizes that the standardized HO-8 policy only provides loss settlement at Actual Cash Value (ACV), but he also understands that the California mandatory special provisions form will allow him to make a claim to recoup his cost to repair or replace the damaged property if all of the following are TRUE regarding Herb’s claim, EXCEPT:
Answer Choices: Select the Correct Answer
If he restores the duplex to the same occupancy level and does not increase that level.
He restores the duplex on the same site where it was located at the time of the loss.
He submits his claim for the cost to repair or replace the property within 12 months of the loss.
He submits his claim for the cost to repair or replace the property within 24 months of the loss.
Question 26 of 100
Your answer: He submits his claim for the cost to repair or replace the property within 24 months of the loss. is incorrect. The correct answer is: He submits his claim for the cost to repair or replace the property within 12 months of the loss..
EXPLANATION:
The question is asking you to choose the answer that is NOT TRUE. The only answer choice that is not true regarding Herb’s claim is: “He submits his claim for the cost to repair or replace the property within 12 months of the loss.” This answer choice is not true because the California mandatory special provisions form allows Herb 24 months to submit his claim.
Question 26 of 100
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?
Answer Choices: Select the Correct Answer
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.
Question 27 of 100
Your answer: An employee of the insured injured another employee while driving the insured’s forklift. is incorrect. The correct answer is: A deceased insured’s brother has temporary legal custody of the insured’s business property. .
EXPLANATION:
In the case of the death of an insured, the person that has legal custody of the insured’s business is also considered to be an insured while acting in that capacity.
Question 27 of 100
Which of the following is not an “additional coverage” under Homeowners Liability – Section II coverage?
Answer Choices: Select the Correct Answer
Payments made by the insurer to settle a claim.
Interest accruing after a legal judgment is entered.
The insurer’s costs to investigate a claim.
Damage to Property of Others.
Question 28 of 100
Your answer: The insurer’s costs to investigate a claim. is incorrect. The correct answer is: Payments made by the insurer to settle a claim..
EXPLANATION:
Settlements paid by the insurer come from the limits of liability shown on the Declarations page and are not an “additional coverage.”
Question 28 of 100
Which of the following best describes the purpose of an “insuring agreement”?
Answer Choices: Select the Correct Answer
To describe the promises of the insurer and the insured and the coverages provided
To identify the named insured
To explain the duties of the named insured
To set forth the conditions and exclusions
Question 29 of 100
Your answer: To set forth the conditions and exclusions is incorrect. The correct answer is: To describe the promises of the insurer and the insured and the coverages provided.
EXPLANATION:
Insuring agreements are the promises or obligations of the insurer and the insured. In property insurance, it also contains the coverage the insured has purchased.
Question 29 of 100
The HO-3 form covers which of the following that the HO-4 form does not?
Answer Choices: Select the Correct Answer Automobiles Motorcycles Dwellings Work related injuries
Question 30 of 100
Your answer: Work related injuries is incorrect. The correct answer is: Dwellings.
EXPLANATION:
The HO-3 covers a dwelling structure; the HO-4 covers the insured’s contents. The other choices are excluded on both forms
Question 30 of 100
According to the commercial auto policy definitions, an “accident:”
Answer Choices: Select the Correct Answer
Includes continuous or repeated exposure to the same conditions.
Must be sudden and unexpected.
Must be unexpected and unpreventable.
Is any event that causes injury or damage.
Question 31 of 100
Your answer: Is any event that causes injury or damage. is incorrect. The correct answer is: Includes continuous or repeated exposure to the same conditions. .
EXPLANATION:
The auto forms of the past used to simply cover the term “accident.” It did not include continuous or repeated exposure to the same conditions. Many claims were denied because of this restriction. The current forms now include the broader definition and provide better coverage.
Question 31 of 100
Which of the following is true about “open peril” coverage?
Answer Choices: Select the Correct Answer
It provides coverage for all perils, unless that peril is specifically excluded.
It provides coverage for scheduled risks.
It provides coverage for the named perils.
It does not exclude any perils from coverage.
Question 32 of 100
Your answer: It provides coverage for all perils, unless that peril is specifically excluded. is correct.
EXPLANATION:
On a “named peril” cause of loss form, the covered perils are named or specified. If the peril is not listed, then coverage does not apply. Conversely, on an “open peril” cause of loss form, ALL perils are covered unless the peril(s) is/are specifically excluded. “Open peril” cause of loss forms contain more exclusions than named peril forms for obvious reasons.
Question 32 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 33 of 100
Your answer: 50% of your insured’s damage, because the insured and the other driver were both 50% at fault. is correct.
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 33 of 100
An insured who had a $500,000 primary liability policy purchased a $1 million Umbrella liability policy with a $2,000 self-insured retention limit. Later, the insured allowed the required underlying primary policy with a limit of $100,000 to expire. A week after that, the insured became liable for a $100,000 loss that is not excluded by the provisions of either the primary policy or the Umbrella policy. How will this loss likely be settled?
Answer Choices: Select the Correct Answer
The insured will pay the full $100,000 loss.
The umbrella policy will pay the full $100,000 loss.
The underlying policy will pay the full $100,000 loss.
The insured will pay $2,000, and the umbrella policy will pay the remainder of the loss.
Question 34 of 100
Your answer: The umbrella policy will pay the full $100,000 loss. is incorrect. The correct answer is: The insured will pay the full $100,000 loss..
EXPLANATION:
Because the insured allowed the required underlying policy to expire, he is responsible for the $100,000 loss. The Umbrella policy does not recognize a reduction in the underlying limits nor the non-renewal of underlying coverage.
Question 34 of 100
The definition of “occupying” in the personal auto definitions means all of the following, EXCEPT:
Answer Choices: Select the Correct Answer In the vehicle Upon the vehicle Out or off the vehicle Under the vehicle
Question 35 of 100
Your answer: Out or off the vehicle is incorrect. The correct answer is: Under the vehicle.
EXPLANATION:
“Occupying” means in, upon, getting in, on, out or off. “Under the vehicle” is not included in the definition of occupying.
Question 35 of 100
In the newest edition of the Commercial Property form, which of the following is now considered part of the building?
Answer Choices: Select the Correct Answer Signs permanently attached Vegetated Roofs Outdoor Property Detached signs
Question 36 of 100
Your answer: Detached signs is incorrect. The correct answer is: Vegetated Roofs.
EXPLANATION:
Vegetated roofs are now part of the building and not subject to the tree, shrubs and plants exclusion under covered property nor the tree, shrubs and plants extension of coverage.
Question 36 of 100
All the following statements are true regarding earthquake insurance under residential property coverage in California, EXCEPT:
Your answer: The offer of earthquake insurance may be made by mail or electronically. is incorrect. The correct answer is: A separate earthquake policy must be issued; an endorsement is not permitted..
EXPLANATION:
According to the California Insurance Code (CIC 10081), earthquake coverage may be provided in the policy of residential property insurance itself, either by specific policy provision or endorsement, or in a separate policy or certificate of insurance which specifically provides coverage for loss or damage caused by the peril of earthquake alone or in combination with other perils.
Question 37 of 100
Vandalism is not covered after a commercial building has been vacant for:
Answer Choices: Select the Correct Answer 15-days 30-days 45-days 60-days
Question 38 of 100
Your answer: 60-days is correct.
EXPLANATION:
Vandalism is not covered after the building has been vacant beyond 60 consecutive days.
Question 38 of 100
The most common method of settling liability insurance claims is through:
Answer Choices: Select the Correct Answer ADRs. Arbitration. Mediation. Negotiated settlement.
Question 39 of 100
Your answer: Arbitration. is incorrect. The correct answer is: Negotiated settlement..
EXPLANATION:
The most common method of settling liability insurance claims is through negotiated settlement.
Question 39 of 100
The crew of a ship is guilty of fraud with the intention of reaping gains at the expense of the owner. In ocean marine coverage, what is this called?
Answer Choices: Select the Correct Answer Perils of the sea Jettison General average Barratry
Question 40 of 100
Your answer: Barratry is correct.
EXPLANATION:
Barratry means fraud by the master or the crew with the intention of reaping gains at the expense of the owner. Examples include setting the ship on fire, diverting the ship from its course, or embezzlement of the cargo.
Question 40 of 100
