IA Test 21 Flashcards
If both the Condominium Association form and the Condominium Unit-Owners form cover the same property, how would a covered loss be handled?
Answer Choices: Select the Correct Answer
Each policy will pay on a pro-rata basis.
Association policy will be excess over the Unit-Owner’s policy.
Each policy will share equally in the loss.
The Unit-Owner’s policy will be excess over the Association policy.
Question 1 of 100
Your answer: Each policy will pay on a pro-rata basis. is incorrect. The correct answer is: The Unit-Owner’s policy will be excess over the Association policy..
EXPLANATION:
If both policies cover the same property, the Condominium Unit-Owner’s form will be excess over the Condominium Association form.
Question 1 of 100
The insured is a trucking company that carries cargo. One of the insured trucks is involved in an accident and the goods it is transporting are damaged. Which of the following coverages would respond to cover this loss?
Answer Choices: Select the Correct Answer
The Commercial Auto policy would respond and pay under “property damage”.
A General Liability policy.
An Inland Marine Motor Truck Cargo policy.
A Commercial Umbrella policy.
Question 2 of 100
Your answer: An Inland Marine Motor Truck Cargo policy. is correct.
EXPLANATION:
Property in the insured’s care, custody and control is excluded. The insured would need to carry a motor truck cargo inland marine type of policy.
Question 2 of 100
Alec goes to an amusement park and rides a roller coaster that was designed to flip the riders upside down. Alec is taller than the average person so when the roller coaster flips, he hits his head on the safety bar. After receiving medical care, Alec files a claim against the amusement park, seeking payment for his medical bills, pain and suffering. What defense against negligence would the amusement park most likely use to deny this claim?
Answer Choices: Select the Correct Answer Assumption of Risk Contributory Negligence Comparative Negligence Intervening Cause
Question 3 of 100
Your answer: Contributory Negligence is incorrect. The correct answer is: Assumption of Risk.
EXPLANATION:
The “Assumption of Risk” defense applies when a person knowingly exposes him/herself to danger or injury.
Question 3 of 100
On Monday afternoon, Carissa’s boss requested that she finish updating the company website by Tuesday morning. Carissa did not want to stay at the office late into the evening so she took her work home to complete it there. On the way home, Carissa remembers that she left an external hard drive back at the office. This hard drive contained files that she needed to complete the website updates so she turns her car around and heads back to the office to retrieve it. Two blocks away from her office, another car runs a stop light and smashes into Carissa’s car, severely injuring her. Which of the following statements would be TRUE in how Carissa would be handled by her employer’s workers compensation coverage?
Answer Choices: Select the Correct Answer
Carissa’s injuries are not compensable because she contributed to her injuries by forgetting the hard drive.
Carissa’s injuries are compensable because she was driving to retrieve a work-related item.
Carissa’s injuries are not compensable as she was commuting to work and coverage does not apply in that case.
Carissa’s injuries are compensable because she was technically “at work”, she was simply taking work home.
Question 4 of 100
Your answer: Carissa’s injuries are not compensable as she was commuting to work and coverage does not apply in that case. is correct.
EXPLANATION:
Workers compensation does not apply to employees when they are commuting to and from work.
Question 4 of 100
The insured owns the following properties. Which one of them would be considered to be “business property” by the personal umbrella liability policy?
Answer Choices: Select the Correct Answer
A farm used for personal use
An apartment building
A cabin at a lake where the insured spends occasional weekends
A single-family home used only as residence by the insured
Your answer: An apartment building is correct.
EXPLANATION:
In this case the apartment building would be considered “business property”.
Question 5 of 100
What does the phrase “free on board destination” mean?
Answer Choices: Select the Correct Answer
Makes the seller responsible to the buyer until the goods have been delivered as agreed.
An ocean term referring to jettison.
The title to the goods to be shipped is transferred to the buyer at the shipping point.
The term is in reference to a cruise ship agreement for passengers.
Question 6 of 100
Your answer: Makes the seller responsible to the buyer until the goods have been delivered as agreed. is correct.
EXPLANATION:
The term is used in two common phrases, “FOB shipping point” and “FOB destination,” to distinguish when the title of goods passes from the seller to the buyer. Under the terms of “FOB shipping point,” the title of the goods passes to the buyer at the shipping point. Similarly, under the terms of “FOB destination,” the title of the goods passes to the buyer when the goods arrive at their destination. The distinction is important because it determines who pays for the shipping costs of the merchandise - whoever holds the title to the merchandise at the time of its shipping pays for its transportation costs unless otherwise noted (e.g., freight prepaid or freight collect). Also, it is important that if the shipment is damaged while traveling the owner must file the freight claim.
Question 6 of 100
Claims filed against the insurance company by the insured are known as:
Answer Choices: Select the Correct Answer First-party claims. Third-party claims. Self-insured claims. Subrogation claims.
Question 7 of 100
Your answer: First-party claims. is correct.
EXPLANATION:
Claims filed against the insurance company by the insured are known as first-party claims.
Question 7 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 8 of 100
2150,
Under California law, the degree of care owed to a trespasser by a property owner is not which of the following?
Answer Choices: Select the Correct Answer
To warn of hidden dangers
Ordinary care
To not set traps
Guarantee safe passage on and off the premises
Question 9 of 100
Your answer: Guarantee safe passage on and off the premises is correct.
EXPLANATION:
Guaranteeing safe passage is not required.
Question 9 of 100
Following a loss by earthquake in California, how many days does the insured have, unless extended in writing by the insurer, to present proof of loss for payment?
Answer Choices: Select the Correct Answer 60 days 30 days 20 days 45 days
Question 10 of 100
Your answer: 60 days is correct.
EXPLANATION:
The 60-day period is established because the insured is required to protect the property from further damage, and separate the damaged property from the undamaged.
Question 10 of 100
Under an equipment dealer’s form, which of the following would not be covered?
Answer Choices: Select the Correct Answer
Inventory
Serviced items
Customer’s property on the insured’s premises
Vehicles for highway use
Question 11 of 100
Your answer: Vehicles for highway use is correct.
EXPLANATION:
Inland marine forms provide coverage for the insured’s goods as well as property of others, but they do not cover automobiles.
Question 11 of 100
The aggregate limit on a liability policy can be expressed as:
Answer Choices: Select the Correct Answer
Per occurrence
Premises/operations
Products and Completed Operations
Both Premises/operations and products/completed operations
Question 12 of 100
Your answer: Both Premises/operations and products/completed operations is correct.
EXPLANATION:
The aggregate is the most the policy will pay for all claims submitted during the policy period. The policy will establish a general aggregate for all claims submitted in the policy period and a separate aggregate for products and completed operations type of claims for the entire year.
Question 12 of 100
Which of the following is the class of insurance, defined by the California Insurance Code (CIC) that includes insurance against financial loss by reason of the nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond, or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate?
Answer Choices: Select the Correct Answer Insolvency insurance. Credit insurance. Mortgage Guaranty insurance. Legal insurance.
Your answer: Mortgage Guaranty insurance. is correct.
EXPLANATION:
Insurance against financial loss by reason of the nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond, or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate, is known as Mortgage Guaranty insurance in California.
Question 13 of 100
In insurance terms, the phrase severability of insurance means:
Answer Choices: Select the Correct Answer
Several insured’s are covered by the policy.
The insurance applies separately to each insured.
Each accident will be treated as a separate occurrence.
The insurer may dissolve its relationship with the insured after a loss.
Question 14 of 100
Your answer: The insurer may dissolve its relationship with the insured after a loss. is incorrect. The correct answer is: The insurance applies separately to each insured..
EXPLANATION:
This means that the insurance applies separately to each insured. However, if more than one insured is involved in the same loss the limits are not increased.
Question 14 of 100
Under an ISO standardized Businessowners policy, which of the following is NOT automatically covered under the policy?
Answer Choices: Select the Correct Answer
Hired and Non-owned Automobile coverage
Loss of earnings after a covered fire
Limited Sign coverage
Replacement cost settlement on building losses
Question 15 of 100
Your answer: Hired and Non-owned Automobile coverage is correct.
EXPLANATION:
“Hired and Non-owned Automobile” coverage must be added by endorsement.
Question 15 of 100
Which of the following would be covered under the building coverage of an NFIP policy?
Answer Choices: Select the Correct Answer
A portable dishwasher.
A clothes washing machine.
The plumbing system of the covered building.
Window curtains.
Question 16 of 100
Your answer: Window curtains. is incorrect. The correct answer is: The plumbing system of the covered building..
EXPLANATION:
Only the plumbing system of the building would be covered under the “building” section of the NFIP policy. The other three answer choices would be covered under the contents (personal property) section of the policy.
Question 16 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 17 of 100
Your answer: Theft is correct.
EXPLANATION:
This would be a theft loss. In this case there is the presumption of theft.
Question 17 of 100
A payment bond is what type of instrument?
Answer Choices: Select the Correct Answer Financial Guarantee Bond Performance Bond Bid Bond Fidelity Bond
Question 18 of 100
Your answer: Financial Guarantee Bond is correct.
EXPLANATION:
A payment bond guarantees that bills for labor and materials will be paid by the contractor.
Question 18 of 100
Sierra’s home is located in a flood zone. In insurance terms, the location of Sierra’s home is considered:
Answer Choices: Select the Correct Answer A peril. A hazard. A risk. A proximate cause.
Question 19 of 100
Your answer: A risk. is incorrect. The correct answer is: A hazard..
EXPLANATION:
A hazard increases the possibility of loss or the severity of a loss. The home located in a flood zone is considered to be a physical hazard.
Question 19 of 100
Jonathan, a licensed California independent adjuster, has received a notice of claim from an insured. How soon must is he transmit this notice to the insurer?
Answer Choices: Select the Correct Answer Within 5 calendar days Within 10 calendar days Within 21 calendar days Immediately
Question 20 of 100
Your answer: Within 5 calendar days is incorrect. The correct answer is: Immediately.
EXPLANATION:
Upon receiving notice of claim, every licensee or claims agent must immediately transmit notice of claim to the insurer. Failure of the licensee or claims agent to immediately transmit notice of claim to the insurer will constitute a separate and distinct violation of California Insurance Code
Question 20 of 100
In the ocean marine insurance policy, the term “average” means:
Answer Choices: Select the Correct Answer
Loss or damage.
The ACV of the ship.
The average value of the claim insured against by the perils of the sea .
That coverage is written on a named peril basis.
Question 21 of 100
Your answer: The average value of the claim insured against by the perils of the sea . is incorrect. The correct answer is: Loss or damage. .
EXPLANATION:
The term “average” in ocean marine insurance refers to loss or damage. In order to protect the ship, its cargo and passengers, some of the cargo may be jettisoned (thrown overboard) to save the ship and cargo. Particular average means only one party pays for the loss. General average means all parties share in the loss.
Question 21 of 100
In a bond that has been in place and renewed for several years with the same carrier, under the “loss sustained under previous insurance condition” which would respond to a claim that was just discovered but which actually happened two years ago?
Answer Choices: Select the Correct Answer The current bond The bond in place two years ago The two bonds would share the loss Neither bond would respond
Question 22 of 100
Your answer: The current bond is correct.
EXPLANATION:
The answer is the current bond as per the policy conditions section of the bond.
Question 22 of 100
Braden has his commercial contents valued at $100,000, insured under a Commercial Property policy for $60,000. Disregarding deductibles and using an 80% coinsurance clause, what is the maximum amount Braden can collect when he suffers a $40,000 loss to the contents in his commercial building?
Answer Choices: Select the Correct Answer $30,000 $20,000 $40,000 $25,000
Question 23 of 100
Your answer: $25,000 is incorrect. The correct answer is: $30,000.
EXPLANATION:
The insured should carry at least $80,000. The coinsurance formula states that the insurance carried is divided by the insurance amount required, times the loss, equals the amount that should be paid. In this case, the insured is underinsured and can only be paid 3/4 (75%) of the loss or $30,000.
Question 23 of 100
Each of the following is true about Farm insurance coverage, EXCEPT:
Answer Choices: Select the Correct Answer
The principal residence may be covered by a Farm policy or a Homeowners form.
Farm coverage may be written as a monoline policy or part of a package policy.
Livestock may be insured.
Property and liability coverages may be included.
Question 24 of 100
Your answer: Livestock may be insured. is incorrect. The correct answer is: The principal residence may be covered by a Farm policy or a Homeowners form..
EXPLANATION:
The principal residence must be covered under a Farmowners policy. The Homeowners policy is not designed to cover farm property, even the residence.
Question 24 of 100
As an independent adjuster in California, your investigation of a two-car traffic accident indicates that both drivers are equally at fault. After speaking with the claimant’s adjuster the two of you agree that both drivers are equally to blame. Your subrogation demand would be for:
Answer Choices: Select the Correct Answer
100% of your insured’s damages as your analysis does not affect what is owed by the other party.
75% of your insured’s damages as each side’s 25% totals 50%.
50% of your insured’s damage, because the insured and the other driver were both 50% at fault.
Nothing. Because both drivers were 50% at fault, each insurance company will pay 100% of the claim on their own insured’s damages.
Question 25 of 100
Your answer: 50% of your insured’s damage, because the insured and the other driver were both 50% at fault. is correct.
EXPLANATION:
California is a “comparative negligence” state. In California the person most at fault is deemed to be the primary cause of the accident. If investigation either by law enforcement or the insurance adjuster determines that there was “comparative negligence” on the part of the other driver(s), all damages owed are subject to apportionment.
Question 25 of 100
A dry cleaner wants to insure the pressure boilers used in the business. They also would like to cover some equipment and accessories that can be used in the boilers but have not yet been installed. Which of the following, if any, can be used to cover this exposure?
Answer Choices: Select the Correct Answer Expediting Expense Coverage Extra Expense Coverage Ordinance and Law Coverage Spare Parts and Equipment Coverage
Question 26 of 100
Your answer: Spare Parts and Equipment Coverage is correct.
EXPLANATION:
The Spare Parts and Equipment Endorsement can be used to schedule the value of this extra equipment and accessories.
Question 26 of 100
The methods of financing workers’ compensation benefits include voluntary private insurance, excess insurance, qualified self-insurance plans, insurance through state funds, and:
Answer Choices: Select the Correct Answer Federal insurance programs. Assumption of the risk. Federal employer assistance programs. Insurance through assigned risk plans.
Question 27 of 100
Your answer: Federal employer assistance programs. is incorrect. The correct answer is: Insurance through assigned risk plans..
EXPLANATION:
Assigned risk plans are state plans to assist employers with financing workers’ compensation benefits.
Question 27 of 100
If a commercial building has been vacant for more than sixty days, which of the perils are affected as regards coverage?
Answer Choices: Select the Correct Answer Vandalism Freezing Fire All of the perils are affected
Question 28 of 100
Your answer: All of the perils are affected is correct.
EXPLANATION:
All of the perils listed are affected as a result of the vacancy. Some of the coverage for certain perils is voided and fire losses are reduced by 15%.
Question 28 of 100
Which of the following would be covered under Coverage C of form HO-3? I. Property normally kept at the insured residence but in transit to a new principal residence II. Personal Property in Switzerland while the insured is on vacation
Answer Choices: Select the Correct Answer II only Both I and II I only Neither I nor II
Question 29 of 100
Your answer: Both I and II is correct.
EXPLANATION:
Coverage C provides protection for personal property owned or used by the insured anywhere in the world - with some exceptions. One is personal property normally stored off the premises - although this can be added by endorsement. (Property of away-from-home students is not “stored”.)
Question 29 of 100
An adjuster has procured a photograph of the scene of an accident on a claim that he/she is adjusting. This photograph is placed into the claims file as which of the following types of evidence?
Answer Choices: Select the Correct Answer Criminal Real Demonstrative Documentary
Question 30 of 100
Your answer: Documentary is correct.
EXPLANATION:
Documentary evidence is any evidence that is produced in the form of a “document”. Most people think of written documentation, however a photograph or a video can be preserved therefore, they are considered to be documentary evidence.
Question 30 of 100
Indemnify Insurance has been using a specific ISO Homeowners forms for several years in all the states where they are an admitted insurer. Indemnify Insurance has recently been admitted to an additional state, but the laws of that state contradict a few of the provisions in the ISO form. How is this situation likely to be handled?
Answer Choices: Select the Correct Answer
Indemnify Insurance will need to change their underwriting practices in order to issue a Homeowners policy that falls in line with state laws.
Indemnify Insurance can write Homeowners policies as usual because the nationally standardized form supersedes state law.
Indemnify Insurance will be prohibited to issue Homeowners policies in the state.
A statutory form will be drawn up and attached to each Homeowners policy Indemnify Insurance writes in the state.
Question 31 of 100
Your answer: Indemnify Insurance will need to change their underwriting practices in order to issue a Homeowners policy that falls in line with state laws. is incorrect. The correct answer is: A statutory form will be drawn up and attached to each Homeowners policy Indemnify Insurance writes in the state..
EXPLANATION:
A statutory form will be drawn up and attached to each Homeowners policy Indemnify Insurance sells in the state.
Question 31 of 100
All of the following are types of “independent adjusters”, EXCEPT:
Answer Choices: Select the Correct Answer A public adjuster. A "cat" adjuster. A staff adjuster. A property and casualty adjuster.
Question 32 of 100
Your answer: A public adjuster. is correct.
EXPLANATION:
A public adjuster works on behalf of the policyholder. A “cat”, staff, and property and casualty adjuster are all types of independent adjuster licenses.
Question 32 of 100
The homeowner policy written to cover only personal property and personal liability is an:
Answer Choices: Select the Correct Answer H0-2 H0-3 H0-4 H0-8
Question 33 of 100
Your answer: H0-2 is incorrect. The correct answer is: H0-4.
EXPLANATION:
This is the HO-4 also referred to as a tenant’s homeowner policy or renters insurance.
Question 33 of 100
Which of the following businesses is NOT eligible to be covered by a Businessowners policy?
Answer Choices: Select the Correct Answer
A credit union.
A commercial office building.
An apartment building with rental units.
A small retail gift shop.
Question 34 of 100
Your answer: A credit union. is correct.
EXPLANATION:
Credit unions, banks and savings and loan companies are not eligible for the BOP because the crime exposure would be too large for the Businessowners policy to cover. The office building, small gift shop, and apartment building are all acceptable risks for a BOP policy.
Question 34 of 100
Which of the following perils would NOT be covered by a Commercial Property policy with a Causes of Loss - Special Form attached to the Building and Personal Property Coverage form?
Answer Choices: Select the Correct Answer
Carolyn’s Fine Gifts must shut down for a month to repair flood damage.
When a riot breaks out in the town square, Bonnie’s Boutique is looted and vandalized in the commotion.
A tornado whips through town, leveling a warehouse belonging to Johnson’s Industries.
Allen’s Appliances loses an entire warehouse in a fire caused by a lightning strike at a nearby power plant.
Question 35 of 100
Your answer: Carolyn’s Fine Gifts must shut down for a month to repair flood damage. is correct.
EXPLANATION:
The loss of income due to the shut down of Carolyn’s Fine Gifts would not be covered by the Special Cause of Loss form. The cause of the loss and the resulting shut down is FLOOD, which is an excluded peril.
Question 35 of 100
The law recognizes two types of waivers. They are:
Answer Choices: Select the Correct Answer Estoppel/indemnity Apparent/implied Express/implied Specific/contractual
Question 36 of 100
Your answer: Specific/contractual is incorrect. The correct answer is: Express/implied.
EXPLANATION:
They are express and implied. An express waiver occurs when the insurer or its representative knowingly gives up a known right under the insurance contract. Perhaps the right to request an appraisal of the damaged property is an example. By comparison, an implied waiver may be the result from some act of neglect on the part of the adjuster.
Question 36 of 100
The purpose of the California Fair Access to Insurance Requirements (FAIR Plan) is to:
Answer Choices: Select the Correct Answer
Assure the availability of automobile liability insurance.
Assure the availability of basic property insurance.
Guarantee the issue of basic property insurance to any applicant.
Pay the obligations of insolvent insurers in California.
Question 37 of 100
Your answer: Guarantee the issue of basic property insurance to any applicant. is incorrect. The correct answer is: Assure the availability of basic property insurance..
EXPLANATION:
The FAIR Plan assures the availability of basic property insurance in California.
Question 37 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 38 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 38 of 100
Which party has the right to request information about a claim at any time?
Answer Choices: Select the Correct Answer The California Department of Insurance The plaintiff’s attorney Law enforcement The agent
Your answer: The California Department of Insurance is correct.
EXPLANATION:
Only the California Department of Insurance (CDI) has the absolute right to request and be provided any claim information at any time. A plaintiff’s attorney may subpoena such information, but it may be considered private information. Law enforcement would also need a subpoena for claim information.
Question 39 of 100
Submit
Which of the following would not be addressed by a court in the determination of a declaratory judgment?
Answer Choices: Select the Correct Answer
Determine if a particular exclusion would apply
Determine if a particular insuring agreement would apply
Determine fault or monetary damages
Determine if other insurance policies apply
Question 40 of 100
Your answer: Determine if a particular insuring agreement would apply is incorrect. The correct answer is: Determine fault or monetary damages.
EXPLANATION:
The court would not determine the fault or monetary judgment in the determination of a declaratory judgment.
Question 40 of 100
