IA Test 14 Flashcards
In a liability situation, “proximate cause” includes what important feature?
Answer Choices: Select the Correct Answer
An unbroken chain of events must lead to the bodily injury or property damage.
The cause of the loss must be proven as negligent.
The indirect cause of loss must be proven before the proximate cause can be proven.
An intervening cause of loss must have broken the chain of events for the proximate cause of the loss to be proven.
Question 1 of 100
Your answer: An unbroken chain of events must lead to the bodily injury or property damage. is correct.
EXPLANATION:
There must be an unbroken link or chain of events between the occurrence and the bodily injury or property damage.
Question 1 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 2 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 2 of 100
The Homeowners “Additional Residence Rented to Others” endorsement will provide coverage for an additional structure, used as a residence, that is rented by the insured as a:
Answer Choices: Select the Correct Answer A one-family dwelling. A two-family dwelling. A one to four-family dwelling. A one to two-family dwelling.
Question 3 of 100
Your answer: A one to four-family dwelling. is correct.
EXPLANATION:
The Homeowners “Additional Residence Rented to Others” endorsement provides coverage for an additional structure, used as a residence, for one to four families.
Question 3 of 100
In which of the following situations should a non-waiver agreement be used?
Answer Choices: Select the Correct Answer
An insured’s picture window was broken by a neighbor throwing a baseball
An insured’s house burned to the ground
An insured’s house shows rot damage, and it appears there is a long-term plumbing leak
An insured’s roof blew off in a tornado
Question 4 of 100
Your answer: An insured’s house shows rot damage, and it appears there is a long-term plumbing leak is correct.
EXPLANATION:
Non-waivers should be executed when there are unresolved questions regarding coverage, limits or both. The adjuster would be wise to present such of waiver to the claimant/insured during the initial site visit.
Question 4 of 100
All of the following are acceptable methods to satisfy the motor vehicle financial responsibility requirement in California, EXCEPT:
Answer Choices: Select the Correct Answer
A certificate of self-insurance issued by the Department of Motor Vehicles.
A motor vehicle liability insurance policy.
A cash deposit of $35,000 with the Department of Motor Vehicles.
A personal savings account with a consistent balance of $50,000.
Question 5 of 100
Your answer: A personal savings account with a consistent balance of $50,000. is correct.
EXPLANATION:
A personal savings account is not an acceptable method to satisfy the California financial responsibility requirement.
Question 5 of 100
A Property Value Reporting form is used to:
Answer Choices: Select the Correct Answer
Present a new claim to the insurer
Report a property theft to police
List and valuate business personal property at an insured location
Present home appraisal value to the insurance company
Question 6 of 100
Your answer: Present home appraisal value to the insurance company is incorrect. The correct answer is: List and valuate business personal property at an insured location.
EXPLANATION:
Property value reporting forms are provided to business owners so that they can accurately list and insure their business personal property to value.
Question 6 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 7 of 100
Your answer: Provide special coverage for certain high technology risks. is incorrect. The correct answer is: Exclude specific accidents, products, work, or locations..
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 7 of 100
How long will the Businessowners Policy pay for “extra expense coverage” used to reduce the loss of income when the insured has suffered a loss from a covered peril?
Answer Choices: Select the Correct Answer
Six consecutive months
Twelve consecutive months
Until the repairs are complete and the business re-opens, subject to a 12 consecutive month limitation
Only until the policy expiration date
Question 8 of 100
Your answer: Until the repairs are complete and the business re-opens, subject to a 12 consecutive month limitation is correct.
EXPLANATION:
The coverage for extra expense is limited to twelve consecutive months after the date of direct physical loss or damage, even if the policy was to expire in the meantime. Coverage also ceases when repairs are complete and the business re-opens.
Question 8 of 100
Workers Compensation policies also include Part II - Employer’s Liability coverage. Which of the following claims would be covered under Part II?
Answer Choices: Select the Correct Answer
The employer fails to maintain the equipment and an employee is injured.
A worker falls from a ladder and sustains injuries.
A fellow worker accidentally injuries another employee.
A worker dies from an occupational disease.
Question 9 of 100
Your answer: The employer fails to maintain the equipment and an employee is injured. is correct.
EXPLANATION:
The act defines negligence on the part of the employer, making the employer liable for injuries sustained by an employee.
Question 9 of 100
Under what circumstances does an insurer allow the transfer of an insured’s rights and duties under a Commercial Package Policy without the permission of the insurer?
Answer Choices: Select the Correct Answer
When the named insured dies.
When the named insured is in the hospital.
When the named insured is out of the United States.
When the named insured is informed of a terminal illness.
Question 10 of 100
Your answer: When the named insured dies. is correct.
EXPLANATION:
If the named insured dies his or her rights and duties are transferred to the deceased’s legal representative. This occurs automatically, the insurer’s permission is not required.
Question 10 of 100
All the following are cause for nonrenewal or cancellation of an automobile policy in California, EXCEPT:
Answer Choices: Select the Correct Answer
a subtantial increase in the hazard insured against.
nonpayment of premium.
the insured declaring bankruptcy.
fraud or material misrepresentation.
Question 11 of 100
Your answer: a subtantial increase in the hazard insured against. is incorrect. The correct answer is: the insured declaring bankruptcy..
EXPLANATION:
According to the California Insurance Code (CIC 661), an insured declaring bankruptcy is not a cause for cancellation or nonrenewal of an auto policy.
Question 11 of 100
What is the “retained limit” of a Personal Umbrella policy?
Answer Choices: Select the Correct Answer
The cost of defending the insured in a lawsuit.
Supplementary Payments coverage.
A deductible that the insured pays when the Personal Umbrella policy covers a claim that was excluded by the underlying liability policy.
A percentage of the policy limits.
Question 12 of 100
Your answer: A percentage of the policy limits. is incorrect. The correct answer is: A deductible that the insured pays when the Personal Umbrella policy covers a claim that was excluded by the underlying liability policy..
EXPLANATION:
This is the deductible that the insured pays under the Personal Umbrella policy when the underlying liability coverage does not apply on a claim, but the Personal Umbrella policy will cover the claim.
Question 12 of 100
The Section I - Property conditions of the California Homeowners Special Provisions form states that if loss or damage relates to a state of emergency under California law, the insured has an extended amount of time after the insurer’s payment of actual cash value, to notify the insurer of the intent to make a replacement cost claim under the HO-2, HO-3, and HO-5 forms. How long is this extended period of time?
Answer Choices: Select the Correct Answer 12 months. 24 months. 36 months. 9 months.
Question 13 of 100
Your answer: 24 months. is correct.
EXPLANATION:
When the loss or damage related to a state of emergency under California law, the insured has 24 months following the insurer’s payment of actual cash value, to make a claim for replacement cost settlement. If the loss or damage results from a cause other than a declared state of emergency, the California Special Provisions form requires that the insured make the replacement cost claim within 12 months.
Question 13 of 100
A 40-year old commercial building is insured for $300,000 and has suffered a partial loss as a result of a hot water heater explosion. It will cost $17,000 for the increased cost of construction to comply with the building codes and $20,000 for all other covered damages. The building is covered under a standard Commercial Property policy, with the special cause of loss form attached. The insured submits the proof of loss for all of the repairs, including the increased costs to comply with the new building codes. Which of the following describes how this claim will be paid?
Answer Choices: Select the Correct Answer
The insurer will pay $15,000 for the increased cost of construction, plus $20,000 for the cost of all other covered damages.
The claims investigation will determine if the claim should be settled at “Actual Cash Value” or “Replacement Cost”, and pay the entire amount accordingly.
The insurer will pay $10,000 for the increased cost of construction, plus $20,000 for the cost of all other covered damages.
The insurer will pay only $20,000 under the “Replacement Cost” provision of the form, and deny the “Increased Cost of Construction” costs.
Question 14 of 100
Your answer: The insurer will pay $15,000 for the increased cost of construction, plus $20,000 for the cost of all other covered damages. is incorrect. The correct answer is: The insurer will pay $10,000 for the increased cost of construction, plus $20,000 for the cost of all other covered damages. .
EXPLANATION:
The insurer will pay $10,000 because this is the limit of liability specified in the additional coverage, for the “Increased Cost of Construction”, plus the $20,000 for the cost of all other covered damages is covered under the policy.
Question 14 of 100
Your insurance company pays for the damages to your auto and for your bodily injury after your car is struck by a hit and run driver. The accident is witnessed by several individuals who can describe the car and its driver but who failed to get a license number. A year after the accident, the owner of the hit and run vehicle turns himself in. It is determined that he was fully insured at the time of the accident but fled because he had been drinking. Pursuant to the California Insurance Regulations, your insurance company can:
Answer Choices: Select the Correct Answer
Do nothing as a full year has passed since the accident occurred
Subrogate against the other insurance company to recover only for the damages to your vehicle
Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury
File a lawsuit to waive the statute of limitations then proceed with subrogation
Question 15 of 100
Your answer: Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury is correct.
EXPLANATION:
Payments made under both your Uninsured Motorist Bodily Injury and Uninsured Motorist Property Damage coverages can be recovered from the responsible party by subrogation if his/her identity is later confirmed.
Question 15 of 100
An insured purchases a $1 million umbrella policy with a $1,000 self-insured retention (SIR) and agrees to maintain the following underlying limits: auto liability - $100/300/50 and personal liability limits of $300,000. The insured is involved in an at-fault auto accident and the claimant is awarded $200,000 for his bodily injuries. What will the umbrella pay if the insured only carries $50/100/50 auto limits?
Answer Choices: Select the Correct Answer
$100,000
$200,000
$50,000
Nothing because the insured violated the maintenance of the policy’s underlying provision.
Question 16 of 100
Your answer: Nothing because the insured violated the maintenance of the policy’s underlying provision. is incorrect. The correct answer is: $100,000.
EXPLANATION:
When the insured does not maintain underlying limits as stated in the umbrella policy, the umbrella carrier pays as though those limits were in effect. The insured would have to pay $50,000, the underlying carrier would pay $50,000 and the umbrella carrier would pay the remainder.
Question 16 of 100
The CGL policy excludes coverage for damage done to the property of others if at the time of the loss that property was in the care, custody and control of the insured. However, the exclusion does not apply if the damage is caused by:
Answer Choices: Select the Correct Answer Water Pollution Earthquake Fire, smoke or explosion
Question 17 of 100
Your answer: Earthquake is incorrect. The correct answer is: Fire, smoke or explosion.
EXPLANATION:
Damage done to the property of others, that was in the care, custody and control of the insured, caused by fire, smoke or explosion would be covered by the CGL. The other three choices are all specifically excluded from coverage.
Question 17 of 100
All of the following are examples of insurable interest, EXCEPT:
Answer Choices: Select the Correct Answer
The interest an individual has in the property her parents will someday leave to her.
An individual’s interest in property she is buying on contract.
A tenant’s interest in improvements she has made to a leased building.
A TV repairman’s interest in a customer’s TV which has been repaired but is still on premises.
Question 18 of 100
Your answer: A TV repairman’s interest in a customer’s TV which has been repaired but is still on premises. is incorrect. The correct answer is: The interest an individual has in the property her parents will someday leave to her. .
EXPLANATION:
In property and casualty insurance the insurable interest must exist at the time of the loss. Insurable interests that may be created in the future or based on certain events are not currently insurable interests.
Question 18 of 100
Tommy’s Tip Top TV Store is delivering a new flat screen TV to Jerry’s house. The delivery people set the TV down on the floor in the hallway to get a better grip. While picking it up, the TV makes deep scratches in the wood floor. How will the business auto policy for Tommy’s Tip Top TV Store respond to Jerry’s demand for damage to his floor?
Answer Choices: Select the Correct Answer
There is no coverage for the damage to the floor.
The damage to the floor is covered under the liability coverage of the business auto form.
The damage to the floor is covered under the CGL form.
The damage must result from an auto accident before coverage will apply.
Question 19 of 100
Your answer: The damage to the floor is covered under the CGL form. is incorrect. The correct answer is: The damage to the floor is covered under the liability coverage of the business auto form..
EXPLANATION:
The business auto form provides property damage liability coverage caused by the unloading or loading of property from the time it is picked up until the time it is delivered to its final destination.
Question 19 of 100
Which of the following is not considered a “breakdown” under Equipment Breakdown coverage?
Answer Choices: Select the Correct Answer
Mechanical failure
Rupture or bursting caused by centrifugal force
Electrical failure
Lack of power, light, heat, steam or refrigeration
Question 20 of 100
Your answer: Lack of power, light, heat, steam or refrigeration is correct.
EXPLANATION:
Breakdown is direct physical loss that causes damage to covered equipment requiring it to be repaired or replaced. It must be caused by a failure of pressure or vacuum equipment, a mechanical failure, including rupture or bursting caused by centrifugal force, or an electrical failure, including arcing, provided the loss or damage is not excluded elsewhere in the coverage form. The lack of power, light, heat, steam or refrigeration is specifically excluded.
Question 20 of 100
The HO-3 form insures for direct physical loss to covered property involving collapse of a building caused by all of the following, EXCEPT:
Answer Choices: Select the Correct Answer Hidden decay Settling Weight of contents Use of defective materials
Question 21 of 100
Your answer: Settling is correct.
EXPLANATION:
Settling or earth movement is excluded under the policy.
Question 21 of 100
An insured submits a claim. The adjuster acknowledges receipt of the claim. Nothing more is heard from the adjuster after repeated attempts by the claimant to contact the adjuster. This is considered to be:
Answer Choices: Select the Correct Answer
An unfair trade practice act
An unfair claims practice act
Misrepresentation of the conditions clause in the policy
An act of discrimination
Question 22 of 100
Your answer: An unfair claims practice act is correct.
EXPLANATION:
Failing to acknowledge with reasonable promptness pertinent communications with respect to a claim is considered an unfair claims practice.
Question 22 of 100
Which of the following is TRUE regarding those who qualify for coverage under the California Fair Access to Insurance Requirements (FAIR) Plan?
Answer Choices: Select the Correct Answer
Any person who applies will receive more competitive premiums than that available through normal channels.
An inspection of the property will be waived for any person who applies to the FAIR Plan.
Any person who is unable to obtain basic property insurance through normal channels may apply to the FAIR Plan.
Any person who does not have an insurable interest in property may apply to the FAIR Plan.
Question 23 of 100
Your answer: Any person who is unable to obtain basic property insurance through normal channels may apply to the FAIR Plan. is correct.
EXPLANATION:
According to the California Insurance Code (CIC 10093), any person having an insurable interest in real or tangible personal property who, after diligent effort, has been unable to obtain basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker, will be entitled upon application to the facility to an inspection of the property by representatives of the inspection bureau.
Question 23 of 100
Which endorsement must be attached to a BOP policy for coverage to apply to a freezer that was damaged by the interruption of a power source?
Answer Choices: Select the Correct Answer
Flood insurance endorsement
Earthquake endorsement
Utility Services - Time Element endorsement
Utility Services - Direct Damage endorsement
Question 24 of 100
Your answer: Utility Services - Direct Damage endorsement is correct.
EXPLANATION:
The Utility Services - Direct Damage endorsement would cover the direct damage to the freezer caused by the power interruption, as long as the freezer was specifically listed on the endorsement.
Question 24 of 100
Mrs. Vincent is covered on a PAP policy which covers her 2012 Ford SUV. She carries liability and full physical damage coverage. Her neighbor owns a 2002 Chevrolet pick up truck with liability coverage only. Mrs. Vincent borrows the truck to pick up lawn furniture, parks the truck at Home Depot and leaves the keys in the ignition. The truck is stolen and later found wrecked. Which of the following would apply?
Answer Choices: Select the Correct Answer
The loss is covered under Mrs. Vincent’s “other than collision coverage.”
The loss would be covered under her neighbor’s policy.
The loss is covered under Mrs. Vincent’s collision coverage.
The loss would be covered under her neighbor’s homeowners coverage.
Question 25 of 100
Your answer: The loss is covered under Mrs. Vincent’s “other than collision coverage.” is correct.
EXPLANATION:
The loss is covered under Mrs. Vincent’s policy under the “other than collision” coverage because the damage resulted from the theft. Since the neighbor did not carry physical damage coverage Mrs. Vincent’s policy would be primary. If the neighbor carried full physical damage coverage then Mrs. Vincent’s policy would be excess.
Question 25 of 100
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
Question 26 of 100
Your answer: I, II and III is correct.
EXPLANATION:
The choice belongs to the David, the insured.
Question 26 of 100
What is a definition of a surety bond?
Answer Choices: Select the Correct Answer
Guarantees the Performance of a Duty
Covers an Individual Employee’s Dishonest Acts
A Form of Court Bond
Covers Public Officials
Question 27 of 100
Your answer: Guarantees the Performance of a Duty is correct.
EXPLANATION:
The surety guarantees the performance of a duty by the principal.
Question 27 of 100
All of the following are common-low duties of an employer under a Workers’ Compensation policy, EXCEPT:
Answer Choices: Select the Correct Answer
Warn workers of inherent dangers.
Provide a safe working environment.
Assumption of risk.
Provide an adequate number of competent fellow workers.
Question 28 of 100
Your answer: Warn workers of inherent dangers. is incorrect. The correct answer is: Assumption of risk..
EXPLANATION:
Assumption of risk is a common-law defense if a claim is filed. All of the other three answer choices are common-law duties.
Question 28 of 100
Joe owns an automobile dealership. Alex purchases a vehicle from Joe and drives it home. Later that week, Alex experiences a mechanical problem with the car and brings it back to Joe’s dealership. Joe asks his best mechanic to test drive Alex’s car around the block to determine the problem. While on the test drive, the mechanic hits another vehicle and injures its driver. Alex’s car is also totaled in the accident. Alex’s vehicle would be covered under which of Joe’s policies?
Answer Choices: Select the Correct Answer Garagekeepers Legal Liability Garage Liability On-Hook Towing Insurance Commercial Automobile
Question 29 of 100
Your answer: Garage Liability is incorrect. The correct answer is: Garagekeepers Legal Liability.
EXPLANATION:
Alex’s vehicle is covered under Joe’s Garagekeepers Legal Liability policy because the car was in the care, custody and control of a mechanic that works for Joe when the accident occurred.
Question 29 of 100
A 100-year flood is an example of which of the following types of risk?
Answer Choices: Select the Correct Answer Fundamental risk. Particular risk. Static risk. Dynamic risk.
Question 30 of 100
Your answer: Dynamic risk. is incorrect. The correct answer is: Static risk..
EXPLANATION:
Question 30 of 100
All of the following are true regarding supplementary payments provided by a Commercial General Liability policy, EXCEPT:
Answer Choices: Select the Correct Answer
Such payments are made in addition to the limits of liability provided by the policy.
It covers the payment of premium on appeal bonds.
It covers the defense costs of groundless suits.
It pays $50 per day for loss of earnings.
Your answer: Such payments are made in addition to the limits of liability provided by the policy. is incorrect. The correct answer is: It pays $50 per day for loss of earnings..
EXPLANATION:
The CGL provides up to $250 per day for loss of earnings as a supplementary payment.
Question 31 of 100
Commercial Property Insurance usually imposes a penalty if, at the time of loss, the insured failed to maintain a minimum amount of coverage. This penalty may apply because of the:
Answer Choices: Select the Correct Answer Coinsurance clause. Valuation clause. Deductible provision. Value policy law.
Question 32 of 100
Your answer: Valuation clause. is incorrect. The correct answer is: Coinsurance clause. .
EXPLANATION:
Commercial property forms contain an 80% coinsurance clause. This means the insured must insure the property for 80% of its value or risk a penalty in case of a partial loss.
Question 32 of 100
The manager of an independent adjusting company in California leaves the business. The Department of Insurance requires notification of the manager’s departure within:
Answer Choices: Select the Correct Answer 10 days 30 days 60 days At license renewal
Question 33 of 100
Your answer: 30 days is correct.
EXPLANATION:
The Insurance Department must be advised within 30 days.
Question 33 of 100
An employee who started a fight and was subsequently injured is entitled to what type of workers compensation benefits?
Answer Choices: Select the Correct Answer Disability benefits only None Medical benefits only A maximum of 50% of the normal benefits
Question 34 of 100
Your answer: None is correct.
EXPLANATION:
An employee who is injured in a fight in which he or she was the initial aggressor is not entitled to workers compensation coverage.
Question 34 of 100
Henry Jackson is employed by Clausen Appliances as a shipping clerk. As he is stacking TVs in the storage room, he is surprised by two men, both carrying guns. They proceed to empty the warehouse of TVs. This is an example of:
Answer Choices: Select the Correct Answer Burglary Mysterious disappearance A fidelity loss Robbery
Question 35 of 100
Your answer: Robbery is correct.
EXPLANATION:
This is an example of a robbery. Force and threat of violence or injury were used.
Question 35 of 100
The insured is covered under a Businessowners Policy. He owns a hardware store that suffers a loss from a covered peril. His loss of income is $50,000. How will the loss be paid under the BOP?
Answer Choices: Select the Correct Answer
On an actual loss sustained basis ($50,000).
No coverage unless separately added by endorsement.
The policy will pay 50% of the loss.
The policy will pay $50,000 for the loss of income less the deductible that applies to the building or contents coverage.
Question 36 of 100
Your answer: On an actual loss sustained basis ($50,000). is correct.
EXPLANATION:
The policy pays for the actual loss of business income sustained due to the necessary suspension of “operations” during the “period of restoration.” The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a covered cause of loss.
Question 36 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 37 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 37 of 100
A large tree has fallen into Paul’s yard caused by wind. The claims service representative (CSR) advises Paul to call a contractor to remove the tree and send the bill to the insurance company. 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.
Pay the $1,200, but then explain the policy provisions and ask to insured to reimburse the insurer for the difference.
Negotiate.
Question 38 of 100
Your answer: Pay only $500. is incorrect. The correct answer is: Pay the $1,200..
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.
Question 38 of 100
What is the maximum amount payable for bail bonds under the “supplementary payments” provided by a personal auto policy?
Answer Choices: Select the Correct Answer $250 $100 $300 $400
Question 39 of 100
Your answer: $300 is incorrect. The correct answer is: $250.
EXPLANATION:
The policy will pay up to $250 for the cost of bail bonds that may be required in case of an auto accident. The insurance company is not required to provide the bonds.
Question 39 of 100
