IA Test 19 Flashcards
In California, which of the following is an untrue statement regarding the adjustment of a total auto physical damage loss?
Answer Choices: Select the Correct Answer
The insurer may elect a cash settlement that is based upon the actual cost of a “comparable automobile” less any deductible provided in the policy.
A cash settlement does not include sales taxes.
The cash settlement includes one-time fees incident to transfer of evidence of ownership of a comparable automobile.
The cash settlement must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration.
Question 1 of 100
Your answer: A cash settlement does not include sales taxes. is correct.
EXPLANATION:
The cash settlement amount must include all applicable taxes, license fees and other one-time fees incident to transfer of evidence of ownership of a comparable automobile. This amount must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration.
Question 1 of 100
Under Section II of the Homeowner Policy which of the following is TRUE regarding Medical Payments Coverage?
Answer Choices: Select the Correct Answer
Pays without regard to negligence
Covers injuries sustained by the insured
Covers injuries sustained by tenants in the insured’s residence
Does not cover invitees
Question 2 of 100
Your answer: Pays without regard to negligence is correct.
EXPLANATION:
Medical Payments Coverage pays without regard to legal liability on the part of the insured. Coverage does not apply to any resident of the insured’s household or a tenant.
Question 2 of 100
The insured is a large super market and maintains a large checking account balance. An employee has a friend who was told in confidence the “transfer account” contained $200,000. The friend, without the employee’s knowledge, pretends that he is the employee with the authority to conduct transactions on behalf of the insured and sends a fraudulent electronic request to the bank to transfer the funds with the intent of stealing them. What coverage would the insured need to cover this claim?
Answer Choices: Select the Correct Answer
Insuring Agreement 3 “Inside the Premises Theft of Money and Securities.”
Employee dishonesty
Insuring Agreement 7 “Funds Transfer Fraud”
Insuring Agreement 5 “Outside the Premises” Coverage
Question 3 of 100
Your answer: Insuring Agreement 7 “Funds Transfer Fraud” is correct.
EXPLANATION:
Insuring Agreement 7 is a new agreement that provides additional coverage that was previously available as an endorsement. Coverage is provided for a loss of funds as a result of a fraudulent instruction upon which an institution relied in order to transfer funds from the transfer account. A transfer account is an account kept at a financial institution for the purpose of being able to transfer funds as needed based on various forms of instructions from the named insured. Funds are defined as money and securities. A fraudulent instruction is a newly defined term in this policy. It is defined as an instruction supposedly transmitted by the named insured but was in fact transmitted by someone else without the named insured’s consent or knowledge. The instruction can be electronic, telegraphic, cable, telefascimile (fax), telephone or teletype. A forged written instruction is also considered fraudulent instruction, as is an instruction supposedly transmitted by an employee but which was fraudulently transmitted without the named insured’s or employee’s knowledge or consent.
Question 3 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 4 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 4 of 100
Which of the following is a true statement regarding subrogation in California?
Answer Choices: Select the Correct Answer
An insurer must conduct a full investigation before it pursues subrogation
An insurer does not have to conduct an investigation after it has paid a claim before it pursues subrogation against another party
An insurer is not required to determine as to whether subrogation is appropriate
Subrogation is a judgment call on the part of the insurer/adjuster without regard to regulations
Question 5 of 100
Your answer: An insurer must conduct a full investigation before it pursues subrogation is correct.
EXPLANATION:
California law requires that an insurer notify a first-party claimant if it intends to pursue subrogation of a claim. Regulations also require every insurer that makes a subrogation demand to include the first-party claimant’s deductible. Furthermore, no insurer may pursue a claim for subrogation unless it has first conducted a thorough, fair, and objective investigation as to whether subrogation is appropriate.
Question 5 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 6 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 6 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 7 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 7 of 100
What is the grace period in which an expired California independent adjuster license may be renewed?
Answer Choices: Select the Correct Answer Five years Four years Three years One year
Question 8 of 100
Your answer: One year is correct.
EXPLANATION:
An expired license or branch office certificate may be renewed at any time within one year after its expiration on the filing of an application for renewal. The licensee, as a condition precedent to renewal, must also pay any required delinquency fee.
Question 8 of 100
Which of the following is NOT a method of determining causation of injuries under a Workers Compensation claim?
Answer Choices: Select the Correct Answer
Determining if the injury or illness arose in the course of the employment.
Determining if the injury or illness arose out of the employment.
Determining the proximate cause of the injury or illness.
Determining if the injured workers was performing duties that he or she was authorized to perform.
Question 9 of 100
Your answer: Determining if the injured workers was performing duties that he or she was authorized to perform. is incorrect. The correct answer is: Determining the proximate cause of the injury or illness..
EXPLANATION:
The tort law concept of proximate cause is beneficial in proving “fault” in relationship to an accident or injury. Workers compensation is “no-fault” coverage, therefore “proximate cause” is not a concern under a Workers’ Compensation claim.
Question 9 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 10 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 10 of 100
Which of the following types of carriers must assume the broadest liability under common law?
Answer Choices: Select the Correct Answer Contract carriers Common carriers Private carriers Owner-operator carriers
Question 11 of 100
Your answer: Private carriers is incorrect. The correct answer is: Common carriers.
EXPLANATION:
Common carriers must assume the broadest liability under common law. They are not responsible for acts of God such as floods, hurricanes or for the negligence of the shipper (poor packing).
Question 11 of 100
What symbol or symbols are used to cover hired and non-owned vehicles under the commercial auto policy?
Answer Choices: Select the Correct Answer Symbols 4 and 5 Symbols 3 and 4 Symbols 8 and 9 Symbol 19
Question 12 of 100
Your answer: Symbols 3 and 4 is incorrect. The correct answer is: Symbols 8 and 9.
EXPLANATION:
Symbols #8 and #9 is used in these instances. Symbol #8 represents hired autos only and symbol #9 represents non-owned autos only.
Question 12 of 100
Which of the following is true regarding the dealers’ physical damage coverage under the Garage policy?
Answer Choices: Select the Correct Answer
The coverage is provided by a blanket limit for covered autos.
The coverage extends to customers’ autos.
The coverage provides an annual maximum limit for comprehensive and collision losses.
The coverage sets a maximum limit per auto.
Question 13 of 100
Your answer: The coverage extends to customers’ autos. is incorrect. The correct answer is: The coverage is provided by a blanket limit for covered autos. .
EXPLANATION:
The dealers’ physical damage limit would be set up on a blanket limit basis. This would apply to comprehensive and collision losses to the auto inventory of the dealership. A blanket limit is used because it is simply not practical to schedule each dealer-owned vehicle for physical damage coverage. Additionally, the amount of the coverage is adjusted by the use of a monthly reporting form.
Question 13 of 100
An insured has a vacation home covered under a Dwelling policy and he would like to add coverage to his policy for Personal Liability and Medical Payments. The insured purchased a Personal Liability Supplement with the minimum limits for Coverage M - Medical Payments. How much coverage for medical payments will the insured have for each person?
Answer Choices: Select the Correct Answer $1,000. $1,500. $2,000. $2,500.
Question 14 of 100
Your answer: $2,500. is incorrect. The correct answer is: $1,000..
EXPLANATION:
The coverage limit for Coverage M of the Personal Liability Supplement is $1,000 per person.
Question 14 of 100
The business personal property limits will be increased by what amount in order to cover seasonal variations in stock in the BOP?
Answer Choices: Select the Correct Answer
25%
The current rate of inflation
8%
15% unless a different percentage amount is shown on the declarations page.
Question 15 of 100
Your answer: 15% unless a different percentage amount is shown on the declarations page. is incorrect. The correct answer is: 25%.
EXPLANATION:
The business personal property will increase by 25% to provide coverage for seasonal variations in stock but only if the insured had insured the property for at least 100% of its monthly average over the last 12 months.
Question 15 of 100
Which one of the following situations may be considered “advertising injury”?
Answer Choices: Select the Correct Answer
A printer’s accidental misprinting of the price of an item in a store’s advertising flyer.
Libel of an organization.
An overcharge by a newspaper for placement of an ad by an individual.
Misspelling of a product’s name.
Question 16 of 100
Your answer: A printer’s accidental misprinting of the price of an item in a store’s advertising flyer. is incorrect. The correct answer is: Libel of an organization..
EXPLANATION:
Only the libel of an organization would be covered under “advertising injury”.
Question 16 of 100
The ABC Office Supply Co. carries $100,000 insurance on a storage building held under a $50,000 mortgage acknowledged in the policy. ABC stores dynamite in the building without informing the insurance company. An explosion destroys the building. What is the maximum the mortgagee can recover?
Answer Choices: Select the Correct Answer $50,000 $0 $25,000 $100,000
Question 17 of 100
Your answer: $0 is incorrect. The correct answer is: $50,000.
EXPLANATION:
Even though the insured concealed the fact that the hazard was increased, the mortgagee will still be able to recover the $50,000.
Question 17 of 100
An unendorsed blanket fidelity bond:
Answer Choices: Select the Correct Answer
Names each covered employee specifically.
Names the positions to be covered.
Does not list the names of the employees.
Covers specified employees by job description and position.
Question 18 of 100
Your answer: Does not list the names of the employees. is correct.
EXPLANATION:
A blanket fidelity bond is a type of fidelity bond covering an employer for dishonest acts by employees. The bond grants blanket coverage to all employees in the service of the employer during the term of the bond. Employee names do not need to be listed on the bond.
Question 18 of 100
The California Special Provisions Homeowners form amends the standard Homeowners forms to allow the insured _______ from the date of the loss to bring a lawsuit against the insurer.
Answer Choices: Select the Correct Answer 18 months. 3 years. 1 year. 2 years.
Question 19 of 100
Your answer: 3 years. is incorrect. The correct answer is: 1 year..
EXPLANATION:
The standardized Homeowners forms allow 2 years from the date of the loss for the insured to bring a lawsuit against the insurance company. However, the California mandatory special provisions form amends this time frame to 1 year.
Question 19 of 100
For which of the following would an employee receive no workers compensation benefits in California?
Answer Choices: Select the Correct Answer
An employee whose injury was caused by his or her own intoxication
An employee who voluntarily participates in any off-duty recreational, social, or athletic activity not constituting part of the employee’s work-related duties.
An employee who was injured during a fight in which she was the initial aggressor
All responses listed are correct
Question 20 of 100
Your answer: An employee whose injury was caused by his or her own intoxication is incorrect. The correct answer is: All responses listed are correct.
EXPLANATION:
While employees who are injured at work are normally provided with workers compensation benefits (without regard to fault), there are exceptions. Workers who are injured because of their own serious and willful conduct receive only 50% of normal benefits. However, there are no benefits payable if the employee is the initial aggressor in a fight that causes injury to him/herself, is injured while intoxicated, or voluntarily participates in any off-duty recreational, social, or athletic activity not constituting part of the employee’s work-related duties. This would mean that all of the answers listed are correct.
Question 20 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 21 of 100
Your answer: 30 days is correct.
EXPLANATION:
The Insurance Department must be advised within 30 days.
Question 21 of 100
Coverage for all reasonable expenses incurred by an insured in order to continue as nearly as practicable the normal operation of his/her business after a loss is:
Answer Choices: Select the Correct Answer Operations Expense Coverage Extra Expense Coverage Additional Expense Coverage Loss of Use Coverage
Question 22 of 100
Your answer: Extra Expense Coverage is correct.
EXPLANATION:
Extra expenses include those incurred as a result of a covered loss that is required in order to continue the normal operation of the business. Example: Temporary re-location expenses, overtime expenses etc.
Question 22 of 100
Robbery involves all of the following, EXCEPT:
Answer Choices: Select the Correct Answer
Burglary.
The presence of the insured or employee.
Threat of violence.
Criminal intent.
Question 23 of 100
Your answer: Burglary. is correct.
EXPLANATION:
Robbery is generally theft or attempted theft from an individual, while burglary is theft from premises with signs of forcible entry or exit. But under the commercial crime form, theft from a watchman on premises (or a janitor by endorsement) is considered burglary. Robbery always involves the threat of violence or injury otherwise it would fit more aptly in the definition of burglary or theft.
Question 23 of 100
Which of the following are are essential if a salvage award is to be made?
I. The property involved must be in peril from some hazard.
II. The salvage service must be voluntary.
III. The effort must be successful.
Answer Choices: Select the Correct Answer I and III only I and II only I, II and III II and III only
Question 24 of 100
Your answer: I, II and III is correct.
EXPLANATION:
All of these are essential if a salvage award is to be made.
Question 24 of 100
All of the following types of signs can be covered by the Sign Coverage Form, except:
Answer Choices: Select the Correct Answer Neon Fluorescent Electrical, not attached to a building Signs carved in stone or brick
Question 25 of 100
Your answer: Electrical, not attached to a building is incorrect. The correct answer is: Signs carved in stone or brick.
EXPLANATION:
The sign carved into stone or brick would not qualify for the form.
Question 25 of 100
Bill’s business employs Meg to clean offices at night, and recently Meg slipped and fell at work, hurting her back. Bill understands that his Workers’ Compensation insurance will provide Meg with:
Answer Choices: Select the Correct Answer
Medical benefits and lost wages.
Psychological counseling.
A representative to help her get benefits from her union.
A lawyer to present her case in court.
Question 26 of 100
Your answer: Medical benefits and lost wages. is correct.
EXPLANATION:
Workers’ Compensation insurance provides medical benefits and lost wages. The other choices are all incorrect regarding the benefits of Workers’ Compensation insurance.
Question 26 of 100
Dwelling forms provide what amount of coverage for grave markers and mausoleums?
Answer Choices: Select the Correct Answer Nothing $5,000 $1,000 $2,000
Question 27 of 100
Your answer: Nothing is correct.
EXPLANATION:
The dwelling forms do not provide any coverage for these items. The homeowners forms provide a limit of $5,000.
Question 27 of 100
Coverage for earthquakes and volcanic eruptions may be attached to Commercial Property Insurance. When the Earthquake Cause of Loss Form is attached, a series of earthquakes or volcanic eruptions will be treated as a single event whenever the series of shocks or eruptions occurs within a:
Answer Choices: Select the Correct Answer 168-hour period. 24-hour period. 48-hour period. 96-hour period.
Question 28 of 100
Your answer: 96-hour period. is incorrect. The correct answer is: 168-hour period. .
EXPLANATION:
Even though all the Commercial Cause of Loss Forms cover volcanic action, the earth movement is not covered. Earthquake insurance must be purchased as a separate endorsement. The form defines an earthquake as a single event for a 168-hour limit.
Question 28 of 100
The liability coverage on the BOP would provide coverage for which of the following?
Answer Choices: Select the Correct Answer
Injury or damage caused by the operation of mobile equipment
An injury that is also covered by Workers Compensation Law
Liability that is caused by the operation of a business auto
Liability resulting from the accidental escape of pollutants
Question 29 of 100
Your answer: An injury that is also covered by Workers Compensation Law is incorrect. The correct answer is: Injury or damage caused by the operation of mobile equipment.
EXPLANATION:
Injury or property damage to others caused by the operation of mobile equipment on the insured’s premises such as a forklift would be covered by the BOP policy. The other three answers are all specifically excluded.
Question 29 of 100
Under the California Insurance Frauds Prevention Act (IFPA), facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called:
Answer Choices: Select the Correct Answer A suspected fraud occurrence. A red flag event. A reasonable belief occurrence. A willful event.
Question 30 of 100
Your answer: A red flag event. is correct.
EXPLANATION:
Facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called a “red flag” or a “red flag event” in California.
Question 30 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 31 of 100
our 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 31 of 100
Which of the following is correct regarding the duties and responsibilities of the insured following a loss under a Homeowners policy?
Answer Choices: Select the Correct Answer
The insured must prepare an inventory of the damaged property which includes the dollar amount of its replacement cost.
Within 24 hours of the loss, the insured must notify the insurance company.
The insured must attempt to protect the property from further damage.
The insured must file a police report, regardless of the type of loss.
Question 32 of 100
Your answer: The insured must file a police report, regardless of the type of loss. is incorrect. The correct answer is: The insured must attempt to protect the property from further damage. .
EXPLANATION:
The insured is required to protect the property from further damage. The policy contains a “reasonable repairs” clause providing the coverage to make temporary repairs to protect the property until permanent repairs can be made. In case of theft the insured is required to notify the police.
Question 32 of 100
In California, which of the following is the definition of an “insurable event”?
Answer Choices: Select the Correct Answer
California law requires insurance companies to compensate a policyholder for a covered loss, but that holders should be neither penalized nor rewarded by a loss.
An expected or unexpected event, that is covered by an insurance policy, subject to California law.
Any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against him, may be insured against, subject to California law.
Any event caused by a third-party, against an insured, that is covered by insurance and subject to California law.
Question 33 of 100
Your answer: An expected or unexpected event, that is covered by an insurance policy, subject to California law. is incorrect. The correct answer is: Any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against him, may be insured against, subject to California law..
EXPLANATION:
The definition of an “insured event” as detailed by California law is: “Any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against him, may be insured against, subject to California law.”
Question 33 of 100
Which of the following is the provision in a liability policy that allows an insured to report incidents or circumstances that result in claims being filed in the future?
Answer Choices: Select the Correct Answer Defense Within Limits provision. Other Insurance provision. Supplementary Payments provision. Discovery provision.
Question 34 of 100
Your answer: Discovery provision. is correct.
EXPLANATION:
The Discovery provision allows an insured to report incidents or circumstances that may result in a claim being filed in the future. This provision is found mainly in liability policies with “claims-made” coverage triggers.
Question 34 of 100
A personal auto policy provides coverage for all of the following drivers of an insured car, EXCEPT:
Answer Choices: Select the Correct Answer
A thief who steals the car.
A neighbor who uses the car with the insured’s permission.
The insured’s spouse.
The insured’s child who attends school in another state.
Question 35 of 100
Your answer: A thief who steals the car. is correct.
EXPLANATION:
Obviously, the thief did not have permission to drive the car. He or she would never be considered an insured.
Question 35 of 100
QUESTION:
Which of the following is covered by the NFIP?
Answer Choices: Select the Correct Answer Overflow of inland or tidal water. Vehicles. A broken water main. Livestock.
Question 36 of 100
Which of the following is covered by the NFIP?
Your answer: Overflow of inland or tidal water. is correct.
EXPLANATION:
Overflow of inland or tidal water is the prime coverage under the NFIP. Mudflow is also covered, mudslides are not. The coverage does not include damage or loss to livestock, vehicles or roads.
Question 36 of 100
A standard ISO Homeowners policy is best described as a:
Answer Choices: Select the Correct Answer
Property policy that offers optional liability insurance.
Package policy that provides property and liability insurance.
Personal insurance policy for anyone who owns property.
Personal insurance contract between the insured and the agent.
Question 37 of 100
Your answer: Package policy that provides property and liability insurance. is correct.
EXPLANATION:
The Homeowners policy provides both property and liability coverage.
Question 37 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 38 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 38 of 100
Mr. and Mrs. Smith own a building worth $100,000 and have it insured under three policies, each containing a pro-rata “Other Insurance” clause. Carrier A provides $10,000; Carrier B provides $10,000, and Carrier C provides $80,000. If there is a $20,000 fire loss, how will the claim be divided, if at all?
Answer Choices: Select the Correct Answer
Carrier C will pay the entire loss since its limit is higher than the loss.
Carrier A will pay $2,000, Carrier B will pay $2,000, and Carrier C will pay $16,000.
Carrier A will pay $10,000 and Carrier B will pay $10,000.
Each carrier will pay $6,666.66.
Question 39 of 100
Your answer: Carrier A will pay $2,000, Carrier B will pay $2,000, and Carrier C will pay $16,000. is correct.
EXPLANATION:
Since more than one policy covers the loss, the “Other Insurance” clause will be invoked, and each carrier will pay according to how its limit compares to the total amount of insurance in force. Carrier A writes 10% of the total, and would pay 10% of the loss, and so on.
Question 39 of 100
Oliver Dogwood was in an auto accident which destroyed his car. While investigating the accident, Adjuster Doright found that Mr. Dogwood paid $1,000 for the vehicle. After checking with others he found the same vehicle with an asking price of $1,700, a retail price of $2,150 and a dealer price of $1,750. What amount will Mr. Dogwood receive?
Answer Choices: Select the Correct Answer $1,950 $2,150 $1,000 $1,700
Question 40 of 100
Your answer: $2,150 is correct.
EXPLANATION:
Mr. Dogwood will receive $2,150 plus any sales tax. The insured is required to pay retail price plus sales tax.
Question 40 of 100
A settlement in which the claimant receives payment in installments over a period of time instead of a lump sum is:
Answer Choices: Select the Correct Answer A Structured Settlement. Scheduled Payment Release. Full Release Settlement. Open-Ended Release.
Question 41 of 100
Your answer: A Structured Settlement. is correct.
EXPLANATION:
A structured settlement is usually reserved for large settlements. Structured settlements may call for part of the full amount to be paid as a lump sum.
Question 41 of 100
Under an unendorsed commercial building and personal property form, loss valuation is based on:
Answer Choices: Select the Correct Answer Actual cash value. Market value. Original cost. Replacement cost.
Question 42 of 100
Your answer: Replacement cost. is incorrect. The correct answer is: Actual cash value. .
EXPLANATION:
Losses are settled at ACV (Actual Cash Value). If the insured desires replacement cost settlement, a separate endorsement must be purchased.
Question 42 of 100
Which of the following bests describes the process of mediation?
Answer Choices: Select the Correct Answer
A summons to give testimony
Estoppel because of certain acts of others
Both parties present their dispute to a person usually in the legal profession; nothing is binding on either party
All parties submit their differences to a disinterested third party; the result is binding on both parties
Question 43 of 100
Your answer: Both parties present their dispute to a person usually in the legal profession; nothing is binding on either party is correct.
EXPLANATION:
In mediation, both opposing parties present their dispute to an impartial third party, usually a trial lawyer or retired judge, who helps the parties analyze their dispute and devise a compromise. Nothing is binding on either party until an agreement is formulated and agreed to by the opposing parties.
Question 43 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 44 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 44 of 100
Which of the following situations would be covered by liability insurance under a Personal Automobile policy?
Answer Choices: Select the Correct Answer
An insured who rents a private garage, backs his car in and damages the garage.
An insured damages another vehicle while driving a motorcycle.
An insured causes injuries while operating a taxi cab.
An auto mechanic has an accident while road testing a customer’s vehicle.
Question 45 of 100
Your answer: An insured damages another vehicle while driving a motorcycle. is incorrect. The correct answer is: An insured who rents a private garage, backs his car in and damages the garage. .
EXPLANATION:
Normally, the liability section of the personal auto policy excludes damages to property in the care and custody of the insured. This would include the insured’s property and the property of others. The policy makes an exception and provides coverage to a residence or private garage rented to the insured.
Question 45 of 100
Under an unendorsed CGL “claims-made” policy, a claim is covered if it is reported:
Answer Choices: Select the Correct Answer
During the policy period or 60 days after the expiration date of the policy.
Anytime after the policy has expired.
Within one year of the expiration date.
Anytime.
Question 46 of 100
Your answer: Within one year of the expiration date. is incorrect. The correct answer is: During the policy period or 60 days after the expiration date of the policy. .
EXPLANATION:
Under the claims-made policy, claims are covered if the occurrence took place after the retroactive date and it is reported within 60 days after the current policy expiration date. If another claim for that same occurrence is made within five years from the policy expiration date, coverage will be triggered.
Question 46 of 100
All of the following are reasons that an adjuster should keep very detailed log notes, EXCEPT:
Answer Choices: Select the Correct Answer
To assist in determining the negligent parties.
To assist in determining if the claim is fraudulent.
To produce notes that will support a fraudulent denial of claims.
To be used in case of a future arbitration, mediation, or litigation proceeding.
Question 47 of 100
Your answer: To assist in determining if the claim is fraudulent. is incorrect. The correct answer is: To produce notes that will support a fraudulent denial of claims. .
EXPLANATION:
The adjuster’s log notes are used to determine negligent parties, to assist in detecting fraud, to become a part of the claims file, and to be used in future proceedings. The log notes are not intended to produce a fraudulent record to deny a claim.
Question 47 of 100
Under the CGL policy, each of the following statements are true about the general aggregate limit, EXCEPT:
Answer Choices: Select the Correct Answer
It only applies to all losses included within the products and completed operations hazard.
All losses under the premises and operations subline are subject to the limit.
It is an annual limit that is reinstated at the beginning of each new policy year.
Once the aggregate has been exhausted, the insurer has no further obligation for additional claims.
Question 48 of 100
Your answer: All losses under the premises and operations subline are subject to the limit. is incorrect. The correct answer is: It only applies to all losses included within the products and completed operations hazard..
EXPLANATION:
The general aggregate in the CGL policy applies to premises and operations, personal injury/advertising injury, medical payments and damage to Premises Rented to You (previously referred to as “fire damage legal liability”). Products and Completed Operations coverage has its own separate aggregate limit.
Question 48 of 100
An applicant for an independent adjuster license must file with the Commissioner a surety bond in the amount of:
Answer Choices: Select the Correct Answer $10,000. $5,000. $2,500. $2,000.
Question 49 of 100
Your answer: $2,000. is correct.
EXPLANATION:
No license will be issued unless the applicant files with the Commissioner a surety bond executed by a surety company authorized to do business in the state in the sum of $2,000 conditioned for the faithful and honest conduct of business by the applicant. Such bond as to its form, execution, and sufficiency of the sureties must be approved by the Commissioner.
Question 49 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 50 of 100
Your answer: 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.
Question 50 of 100
All of the following would have an insurable interest in a home and be insurable under the homeowners program, EXCEPT:
Answer Choices: Select the Correct Answer
A co-owner of a 2-family house occupying the second floor apartment.
The owner of a seasonal dwelling who has his primary dwelling insured under an HO-3.
A non-occupant realtor.
An individual who owns a house under construction.
Question 51 of 100
Your answer: A non-occupant realtor. is correct.
EXPLANATION:
A non-occupant realtor would not have an insurable interest in the property.
Question 51 of 100
Which of the following policy forms would BEST protect a business that must keep operating at any cost after a loss?
Answer Choices: Select the Correct Answer Extra Expense Business Income Gross Earnings Contingent Business Interruption
Question 52 of 100
Your answer: Extra Expense is correct.
EXPLANATION:
Certain types of risks cannot be shut down because of a loss. Banks, hospitals, dairies are some examples. Extra Expense coverage is needed.
Question 52 of 100
Which of the following is a necessary part of a complete commercial general liability policy?
Answer Choices: Select the Correct Answer
Extended reporting period endorsement
Common policy conditions
Exclusion of specific accidents endorsements
All of the responses are correct
Question 53 of 100
Your answer: All of the responses are correct is incorrect. The correct answer is: Common policy conditions .
EXPLANATION:
Most policies contain “common policy conditions” which spell out the duties of the parties to the contract.
Question 53 of 100
All of the following illustrations could be expected on a FIRM, EXCEPT:
Answer Choices: Select the Correct Answer
A community’s base flood elevations.
The standard premium rates for a flood zone.
The Special Flood Hazard Area boundaries.
A community’s flood zone designations.
Question 54 of 100
Your answer: The standard premium rates for a flood zone. is correct.
EXPLANATION:
FIRMs are used to set rates, but the map would not display those rates as there are other factors that can influence the premium amount.
Question 54 of 100
Which of the following would not have the capacity to enter into a contract?
Answer Choices: Select the Correct Answer
A person who is under the influence of drugs at the time of making the agreement.
A person who agrees to purchase a sports car without carefully thinking about the costs involved.
A person who is insured by the Auto Assigned Risk Plan.
A person who has just turned 18.
Question 55 of 100
Your answer: A person who is under the influence of drugs at the time of making the agreement. is correct.
EXPLANATION:
Legally speaking, a person must be an adult and not be under the influence of alcohol or drugs or mentally impaired at the time of making an agreement for that agreement to be considered a contract.
Question 55 of 100
An insured owns a set of six drawing pens designed and used by Benjamin Franklin. Each pen is worth $1,000 alone, but the set is worth $12,000. One pen is destroyed by a covered peril. Under the pair or set clause the insurance company will pay a maximum of which of the following amounts?
Answer Choices: Select the Correct Answer $7,000 $1,000 $12,000 $2,000
Question 56 of 100
Your answer: $12,000 is incorrect. The correct answer is: $7,000.
EXPLANATION:
The company is obligated to repair, replace, or restore the set as one option. Since one pen was totally destroyed, there is no way to repair, replace, or restore the entire set. The second option is to pay the insured the difference between the actual cash value of the full set ($12,000) and the actual cash value of the undamaged part or parts. Each of the remaining pens is worth $1,000 for a total of $5,000 for the remaining five pens. The actual cash value of the full set ($12,000) less $5,000 leaves the insurer owing the insured $7,000.
Question 56 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 57 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 57 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 58 of 100
Your answer: I and II only. is correct.
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 58 of 100
Lightning strikes a 50-foot oak tree in an insured’s yard splitting the tree in half. The tree falls hitting several small trees causing extensive damage to the trees and scattering debris in the yard. The HO-2 Homeowners Policy will pay:
Answer Choices: Select the Correct Answer
A maximum of $250 per tree.
$500 per tree plus the cost of debris removal.
A maximum of $500 per tree.
$250 per tree plus the cost of debris removal.
Question 59 of 100
Your answer: A maximum of $500 per tree. is correct.
EXPLANATION:
Most homeowner policies provide a maximum limit of 5% of coverage A and a maximum of $500 for any one tree, shrub or plant.
Question 59 of 10
When completing an application for an independent claims adjuster license in California, one year of experience consists of not less than _____ hours of actual compensated work performed by the applicant.
Answer Choices: Select the Correct Answer 1,000 500 2,000 750
Question 60 of 100
Your answer: 2,000 is correct.
EXPLANATION:
One year of experience consists of not less than 2,000 hours of actual compensated work performed by each applicant preceding the filing of the application. Applicants must substantiate claimed years and hours of qualifying experience and the exact details as to the character and nature by written certifications from employers, subject to independent verification by the Commissioner.
Question 60 of 100
In California, an insurer may not recommend a specific body shop to make repairs on the auto involved in a claim, unless:
Answer Choices: Select the Correct Answer
The body shop has non-manufacture parts on hand to do the job.
It is the only body shop available in the immediate area.
A referral is expressly requested by the insured.
Never.
Question 61 of 100
Your answer: Never. is incorrect. The correct answer is: A referral is expressly requested by the insured..
EXPLANATION:
California regulations state that the insured has his or her choice of repair facilities. The insured may ask for a recommendation, but still makes the final decision.
Question 61 of 100
Axel Jamison contacts an insurance agent to purchase a Homeowners policy. The agent advises Axel that he will stop by later that day to inspect the home and take the policy application. Before the agent arrives, Axel hides his collection of venomous snakes and does not disclose them on his policy application. The Homeowners policy, with personal liability coverage is issued later that week, and the next day a snake escapes and bites a neighbor. How will the adjuster handle this claim?
Answer Choices: Select the Correct Answer
The claim will be paid because the policy provides personal liability coverage.
The claim will be denied based upon soft fraud.
The claim will be denied because Axel is guilty of concealment.
A reservations of rights letter will be issued to the insured while the adjuster continues the claims investigation.
Question 62 of 100
Your answer: A reservations of rights letter will be issued to the insured while the adjuster continues the claims investigation. is incorrect. The correct answer is: The claim will be denied because Axel is guilty of concealment. .
EXPLANATION:
Axel concealed the hazard of his venomous snakes, therefore. the claim will be denied.
Question 62 of 100
Which of the following is not a common risk management technique?
Answer Choices: Select the Correct Answer
Multiply the risk by engaging in hazardous activities.
Avoid the risk by avoiding the activity or selling the property which created the risk.
Assume the risk through deductibles or self-insurance.
Share the risk with others.
Question 63 of 100
Your answer: Assume the risk through deductibles or self-insurance. is incorrect. The correct answer is: Multiply the risk by engaging in hazardous activities. .
EXPLANATION:
Multiplying a risk is not a risk management technique as it would increase the risk.
Question 63 of 100
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 64 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 64 of 100
All of the following are listed on the common Declarations page of a Commercial Package Policy (CPP), EXCEPT:
Answer Choices: Select the Correct Answer
A list of perils insured against.
The policy period.
The name and mailing address of the insured.
The insured’s premium for each coverage part purchased.
Question 65 of 100
Your answer: The name and mailing address of the insured. is incorrect. The correct answer is: A list of perils insured against. .
EXPLANATION:
A list of perils insured against is not included on the common policy Declarations page of a Commercial Package Policy. The policy period, the premium for each coverage part, and the name and mailing address of the insured ARE listed.
Question 65 of 100
Under the standard ISO Farm insurance Special Cause of Loss form, coverage for vandalism or breakage of glass is excluded if the premises has been vacant for _____ days or more.
Answer Choices: Select the Correct Answer 45 15 60 30
Question 66 of 100
Your answer: 60 is correct.
EXPLANATION:
Under the standard ISO Farm insurance policy, if a property has been vacant for 60 or more days prior to the loss, certain perils become excluded. These exclusions include vandalism and glass breakage. Other perils such as fire and water damage could have limited coverage if the vacancy clause of the policy is violated.
Which of the following is correct regarding the Foreign Coverage endorsement to a Workers Compensation policy?
Answer Choices: Select the Correct Answer
Coverage applies to employees that are hired within the limits of the USA while they are traveling or temporarily residing outside the United States, its territories or possessions, or Canada.
All of the answer choices are correct.
Employees hired outside the limits of the United States are not covered.
Employees hired within the United States can be covered abroad for 90 days or less.
Question 67 of 100
Your answer: All of the answer choices are correct. is correct.
EXPLANATION:
This coverage applies only to employees that are hired within the limits of the United States while they are traveling or temporarily residing outside the United States, its territories, possessions or Canada for a period no longer then 90 days. The insurance does not apply to any employee hired outside the limits of the United States. The insurer can exclude work at locations in other countries on the endorsement.
Question 67 of 100
Under the Physical Damage portion of a Personal Auto Policy, if the insured’s car is stolen, transportation expenses will be provided after a waiting period of:
Answer Choices: Select the Correct Answer 36 hours. 12 hours. 48 hours. 24 hours.
Question 68 of 100
Your answer: 36 hours. is incorrect. The correct answer is: 48 hours..
EXPLANATION:
When the vehicle is stolen transportation expenses are not paid until a 48-hour waiting period has passed.
Question 68 of 100
When is it appropriate for an adjuster to secure a non-waiver agreement with an insured?
Answer Choices: Select the Correct Answer
If the adjuster senses the claim may be fraudulent in nature.
If the adjuster is unsure of coverage.
If there is a question of coverage.
When the adjuster has verified coverage.
Question 69 of 100
Your answer: If the adjuster senses the claim may be fraudulent in nature. is incorrect. The correct answer is: If there is a question of coverage. .
EXPLANATION:
A properly executed non-waiver agreement allows the insurance company to complete a thorough investigation without implying that coverage is available for the loss.
Question 69 of 100
A commercial inland marine condition defining the insurer’s subrogation rights:
Answer Choices: Select the Correct Answer
Explains the circumstances under which the insurer can cancel the policy.
Imposes a time limit within which the insurer must pay or deny the claim.
Guarantees the insurer’s ability to recover from a third party who is responsible for a covered loss.
Requires the insured to maintain any security system described in the policy application.
Question 70 of 100
Your answer: Guarantees the insurer’s ability to recover from a third party who is responsible for a covered loss. is correct.
EXPLANATION:
When the insurer pays a covered claim caused by a third party, the insurer can seek reimbursement for the loss if they can prove negligence or responsibility on the part of the third party.
Question 70 of 100
Under a business auto policy, which of the following types of physical damage loss is not covered?
Answer Choices: Select the Correct Answer
Collision with an animal
Loss to radar detection equipment
Transportation expenses following theft of an entire private passenger auto
Glass breakage caused by vandals
Question 71 of 100
Your answer: Transportation expenses following theft of an entire private passenger auto is incorrect. The correct answer is: Loss to radar detection equipment .
EXPLANATION:
This type of equipment is usually excluded for physical damage coverage because it is normally not legal in most states to use them.
Question 71 of 100
A furrier customers policy does not cover:
Answer Choices: Select the Correct Answer
Property in the custody of the insured.
Property owned by the insured’s customers.
Loss in excess of the value of the property as declared by the owner.
The furrier’s liability as a bailee.
Question 72 of 100
Your answer: The furrier’s liability as a bailee. is incorrect. The correct answer is: Loss in excess of the value of the property as declared by the owner..
EXPLANATION:
The furrier is not responsible for a value beyond what is declared by the owner of the property.
Question 72 of 100
All of the following statements regarding the Motor Carrier Act of 1980 are correct, EXCEPT:
Answer Choices: Select the Correct Answer
It requires truckers to certify that they are able to meet financial obligations arising from physical damage to their vehicle as a result of their trucking operations.
It requires truckers to certify that they are able to meet financial obligations arising from liabilities of their trucking operations.
Commercial Inland Marine Motor Truck Cargo insurance is used to cover the liability for hauled cargo.
The MCS-90 endorsement must be attached to a truckers policy to show that insurance is being used as proof of financial responsibility.
Question 73 of 100
Your answer: Commercial Inland Marine Motor Truck Cargo insurance is used to cover the liability for hauled cargo. is incorrect. The correct answer is: It requires truckers to certify that they are able to meet financial obligations arising from physical damage to their vehicle as a result of their trucking operations. .
EXPLANATION:
The Motor Carrier Act applies to liability only. The MCS-90 form is used to indicate that the vehicle in question has the proper amount of liability coverage including pollution liability for the materials being hauled.
Question 73 of 100
What Commercial Auto form is used to cover taxis and bus companies?
Answer Choices: Select the Correct Answer Business Auto form. Garage Liability form. Trucker’s form. Motor Carrier form.
Question 74 of 100
Your answer: Business Auto form. is incorrect. The correct answer is: Motor Carrier form..
EXPLANATION:
The Motor Carrier form would be used to cover these types of vehicles. This form is used for a risk carrying persons or property. An MCS-90 filing would be required, showing that a minimum of 1 million of liability coverage per accident was in place when hauling passengers for a fee.
Question 74 of 100
The Ordinance or Law Endorsement can be added to a Homeowners form to increase the amount of coverage in ______ increments, up to ______ coverage.
Answer Choices: Select the Correct Answer 20% increments, up to 80% coverage. 25% increments, up to 100% coverage. 30% increments, up to 70% coverage. 15% increments, up to 95% coverage.
Question 75 of 100
Your answer: 25% increments, up to 100% coverage. is correct.
EXPLANATION:
Coverage for Ordinance or Law is already included on all Homeowners forms except the HO-8. The Ordinance or Law Endorsement can be attached to the form, increasing the coverage in 25% increments, up to 100% coverage.
Question 75 of 100
The California Insurance Commissioner, in lieu of suspending or revoking a license issued to an independent adjuster for a violation, may impose which of the following?
Answer Choices: Select the Correct Answer
Jail sentence for up to six months
$500 monetary penalty
Both a $500 penalty and a jail sentence of up to six months
$1,000 monetary penalty
Question 76 of 100
Your answer: $500 monetary penalty is correct.
EXPLANATION:
The monetary penalty is $500, but no jail time.
Question 76 of 100
In crime insurance terminology, an officer of the company, having custody of insured property off the insured premises, is known as a/an:
Answer Choices: Select the Correct Answer Messenger. Custodian. Scheduled executive. Insured property executive.
Question 77 of 100
Your answer: Custodian. is incorrect. The correct answer is: Messenger. .
EXPLANATION:
A messenger means the named insured, any of the insured’s partners or employees, while having care and custody of the property outside the premises.
Question 77 of 100
Under the BOP, how long is business income covered in case of an insured direct loss?
Answer Choices: Select the Correct Answer 12 months 6 months 15 months 9 months
Question 78 of 100
Your answer: 12 months is correct.
EXPLANATION:
The BOP provides business income in the policy automatically. In case of a covered loss the policy would pay for loss of income for up to 12 months after the loss, even if the policy was set to expire in the meantime.
Question 78 of 100
When can an adjuster in California operate under a fictitious name?
Answer Choices: Select the Correct Answer
Never.
Only when he or she has obtained written permission from the Commissioner.
For a 30 day period only.
For a 60 day period only.
Question 79 of 100
Your answer: Only when he or she has obtained written permission from the Commissioner. is correct.
EXPLANATION:
Only when he or she has obtained written permission from the Commissioner.
Question 79 of 100
Mary left an expensive ring on her bedroom dresser before leaving on a business trip. When she returned, the ring was gone. Under the terms of her HO-3 policy, this loss would be considered:
Answer Choices: Select the Correct Answer Robbery Burglary Malicious mischief Theft
Question 80 of 100
our answer: Burglary is incorrect. The correct answer is: Theft.
EXPLANATION:
This would be a theft loss. In this case there is the presumption of theft.
Question 80 of 100
What coverage is provided under the BOP for a steam boiler explosion?
Answer Choices: Select the Correct Answer
The steam boiler itself is covered.
The steam boiler and the damage to the building and contents are covered.
Steam boiler explosions are excluded under the BOP.
A separate limit is provided under the BOP for steam boiler explosions.
Question 81 of 100
Your answer: The steam boiler and the damage to the building and contents are covered. is incorrect. The correct answer is: Steam boiler explosions are excluded under the BOP..
EXPLANATION:
Steam boiler explosions are excluded under the Businessowners policy. Separate equipment breakdown coverage is required to cover steam boiler explosions.
Question 81 of 100
Why do insurers file declaratory judgment actions with the courts?
Answer Choices: Select the Correct Answer
To determine the merits of the case
To determine negligence
To determine the tortfeasor or joint tortfeasors
To determine if a claim falls within the insuring agreement of a policy
Question 82 of 100
Your answer: To determine negligence is incorrect. The correct answer is: To determine if a claim falls within the insuring agreement of a policy.
EXPLANATION:
A declaratory judgment action is a lawsuit seeking a judicial determination of whether policy coverage applies to a claim. Insurers usually file declaratory actions to determine whether a claim falls within the provisions of the insuring agreement of a policy.
Question 82 of 100
What does an insurer do when the insured has possibly waived his or her rights in a liability claim?
Answer Choices: Select the Correct Answer
Send a “reservation of rights” letter.
Deny the claim.
Pay only a portion of the proven liability claim.
Insist the insured obtain his or her own legal counsel.
Your answer: Send a “reservation of rights” letter. is correct.
EXPLANATION:
There are situations where the insured has waived the right to coverage under a liability policy. Failure to report a claim in a timely fashion could cause the insured to waive coverage. The insurer will normally issue a reservation of rights letter to the insured advising that it will investigate the claim but will not commit to pay the claim.
Question 83 of 100
Which of the following coverages are available in the ISO Equipment Breakdown protection coverage form?
Answer Choices: Select the Correct Answer
Expediting Expenses
Business Income and Extra Expense or Extra Expense Only
Spoilage Damage
All of the responses are correct
Question 84 of 100
Your answer: All of the responses are correct is correct.
EXPLANATION:
All of the responses are correct. There are ten coverages available under the form. They include: property damage, expediting expenses, business income and extra expense or extra expense only, spoilage damage, utility interruption, newly acquired premises, ordinance or law coverage, errors and omissions coverage, brands and labels and contingent business income and extra expenses or extra expense only.
Question 84 of 100
You own an independent adjusting company in California. In order to open a second office in a different location you must obtain:
Answer Choices: Select the Correct Answer
Written permission from the Department of Insurance.
A branch manager’s license.
A fidelity bond.
A branch office certificate.
Question 85 of 100
Your answer: A branch office certificate. is correct.
EXPLANATION:
According to the California Insurance Code, “If the licensee intends to conduct business from any location in California other than the principal place of business, a Branch Office Certificate must be obtained by submitting an Application for Branch Office Certificate along with the appropriate fee.”
Question 85 of 100
All the following statements are true regarding earthquake insurance under residential property coverage in California, EXCEPT:
Answer Choices: Select the Correct Answer
Earthquake insurance must be offered with any new policy, or policy renewal.
The offer of earthquake insurance may be made by mail or electronically.
A separate earthquake policy must be issued; an endorsement is not permitted.
The offer may be made prior to, concurrent with, or within 60 days following the policy effective date.
Question 86 of 100
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 86 of 100
How does surety differ from casualty?
Answer Choices: Select the Correct Answer
Casualty covers legal expenses of the insured and surety does not
There are three parties to surety, the principal, obligee and guarantor
Casualty covers the named insured and surety covers the obligee in case the principal under the bond defaults
All of the responses are correct
Question 87 of 100
Your answer: Casualty covers the named insured and surety covers the obligee in case the principal under the bond defaults is incorrect. The correct answer is: All of the responses are correct.
EXPLANATION:
The surety has three parties, namely the principal, obligee and guarantor. Casualty involves the insured, the insurer and the claimant which is referred to as a third party. In casualty the insured does not have to reimburse the insurer for losses paid. The other responses are also correct.
Question 87 of 100
All of the following items would be covered under a Personal Property Replacement Cost Endorsement attached to a Homeowners policy, EXCEPT:
Answer Choices: Select the Correct Answer
A refrigerator in the covered home.
Jewelry that is described in the policy and subject to an agreed value loss settlement.
Carpeting that was damaged inside the covered dwelling.
An awning covering the front porch of the insured home.
Your answer: Jewelry that is described in the policy and subject to an agreed value loss settlement. is correct.
EXPLANATION:
If the property is already subject to an “agreed value” loss settlement under the Homeowners policy, it will not be covered by the Personal Property Replacement Cost Endorsement.
Question 88 of 100
Which of the Commercial Property causes of loss forms provides theft coverage?
I. The Basic form.
II. The Broad form.
III. The Special form.
Answer Choices: Select the Correct Answer II only III only I, II and III II and III only
Question 89 of 100
Your answer: I, II and III is incorrect. The correct answer is: III only.
EXPLANATION:
The basic and broad forms are “named perils” forms and do not include the peril of theft. The special form covers all loss unless excluded, and theft is not excluded.
Question 89 of 100
When are improvements and betterments on commercial property covered under a tenant’s commercial property policy?
Answer Choices: Select the Correct Answer
When the lease calls for them to be insured
If the repairs are promptly made at the expense of the tenant
When others pay for the repair
Never
Question 90 of 100
Your answer: Never is incorrect. The correct answer is: If the repairs are promptly made at the expense of the tenant .
EXPLANATION:
The Building and Personal Property form states that if the insured is a tenant, and if there is covered damage to the tenant’s improvements or betterments, then the loss will paid according to how the tenant goes about repairing the damage. If prompt repairs are made by the tenant, ACV will be paid. If prompt repairs are not made, then only a portion of the cost will be paid. If others do the repair (the lessor, for example), then the insurer will pay nothing.
Question 90 of 100
A claims-made form of commercial umbrella liability policy is “triggered”:
Answer Choices: Select the Correct Answer
By injury that occurs only before the policy period.
At the time the injury or damage occurs.
At the time the claim is first made against the insured during the policy period.
By injury that occurs only after the policy period.
Question 91 of 100
Your answer: By injury that occurs only after the policy period. is incorrect. The correct answer is: At the time the claim is first made against the insured during the policy period..
EXPLANATION:
Coverage is “triggered” at the time the claim is first made against the insured during the policy period.
Question 91 of 100
The insured has a $1,000,000 personal umbrella policy with a $5,000 retention limit. For a $7,000 liability loss not covered under the insured’s personal auto policy, but covered under the umbrella policy, the insurance company would pay:
Answer Choices: Select the Correct Answer $5,000. $3,000. $2,000. $1,000.
Question 92 of 100
Your answer: $5,000. is incorrect. The correct answer is: $2,000..
EXPLANATION:
The company will deduct the $5,000 retention limit and pay on the insured’s behalf the sum of $2,000. The retention limit acts a deductible when a loss is covered by the umbrella policy but not under the underlying insurance.
Question 92 of 100
The standardized Homeowners forms provide ______ for Fire Department Service Charge.
Answer Choices: Select the Correct Answer $1,000 $500 $250 $750
Question 93 of 100
Your answer: $500 is correct.
EXPLANATION:
$500 is paid under the standardized Homeowners forms for Fire Department Service Charge. This is “additional insurance” and the deductible does not apply.
Question 93 of 100
In commercial property coverage, the Utility Service - Time Element Coverage Endorsement covers loss due to the interruption of all of the following, EXCEPT:
Answer Choices: Select the Correct Answer Transportation. Power. Water. Communication.
Question 94 of 100
Your answer: Transportation. is correct.
EXPLANATION:
Loss due to transportation is not a covered loss under this endorsement.
Question 94 of 100
What is the compensation benefit paid for temporary disability?
Answer Choices: Select the Correct Answer
66 2/3% of the state average wage
66 2/3% of the employee’s average weekly wage
100% of the employee’s weekly wage, subject to income taxes
50% of the employee’s average weekly wage
Question 95 of 100
Your answer: 66 2/3% of the employee’s average weekly wage is correct.
EXPLANATION:
Temporary disability benefits are payable 66 2/3% employee’s average weekly wage.
Question 95 of 100
What costs are paid under an Umbrella policy?
Answer Choices: Select the Correct Answer
The policy limit and any defense costs minus any applicable retained limit (deductible).
The policy limit that includes the defense costs.
The policy limit minus any retained limit (deductible).
Only the required underlying limits and the defense costs.
Question 96 of 100
Your answer: The policy limit and any defense costs minus any applicable retained limit (deductible). is correct.
EXPLANATION:
The Umbrella policy, like most liability policies, pays up to the limit of liability for covered claims. In addition, it pays defense costs incurred by the company in the defense of the insured. When the underlying coverage does not cover a claim and the Umbrella policy DOES cover the claim there is usually a retained limit, otherwise known as a deductible, that the insured must pay.
Question 96 of 100
The loss assessment additional coverage under Section II of the homeowner policy will pay for loss:
Answer Choices: Select the Correct Answer To the association of property owners To the corporation of property owners Due to the liability of the insured All of the responses are correct
Question 97 of 100
Your answer: All of the responses are correct is correct.
EXPLANATION:
The $1,000 loss assessment coverage would be paid on the insured’s behalf if they are liable to either the association or corporation of property owners.
Question 97 of 100
An insured’s television set is damaged while at a repair shop. The interest of the repair shop is not covered because of which of the following clauses?
Answer Choices: Select the Correct Answer Insurable Interest No Benefit to Bailee Pair and Set Clause Other Insurance
Question 98 of 100
Your answer: Insurable Interest is incorrect. The correct answer is: No Benefit to Bailee.
EXPLANATION:
The intent of the policy is to only cover the insurable interest of the insured. Bailees, such as a TV repair shop or a dry cleaners. would not be an insured under the insured’s policy. They must provide their own coverage.
Question 98 of 100
All the following are covered under Section II of the homeowner policy EXCEPT:
Answer Choices: Select the Correct Answer
Injury to a newspaper carrier who slips on the insured’s steps
Premiums on bonds required for lawsuits defended by the insurer
Intentional bodily injury to others by the insured
Reasonable expenses incurred by the insured to assist with a lawsuit
Question 99 of 100
Your answer: Injury to a newspaper carrier who slips on the insured’s steps is incorrect. The correct answer is: Intentional bodily injury to others by the insured.
EXPLANATION:
Intentional acts are not covered under the homeowner policy.
Question 99 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 100 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 100 of 100
