IA Test 23 Flashcards
An office building is limited in the number of stories it may contain be eligible for coverage under the Businessowners Policy?
Answer Choices: Select the Correct Answer Five stories Six stories Four stories Seven stories
Question 1 of 100
Your answer: Five stories is incorrect. The correct answer is: Six stories.
EXPLANATION:
Office buildings, including office condominium associations, occupied principally for office purposes, are eligible. Buildings, including apartment buildings, cannot exceed six stories in height or 100,000 square feet in total floor area. Eligible incidental occupancies are (1) apartments; (2) eligible wholesaler, mercantile, service or processing occupancies and contractors which in total do not exceed 35,000 square feet; and (3) contractors which do not occupy more than 7,500 square feet or more than 15 percent of the total area.
Question 1 of 100
Protection and indemnity coverage contained in an ocean marine policy covers:
I. Liability against injuries to seamen.
II. Injury to stevedores, longshoreman and harbor workers.
III. Cargo, if lost or damaged through negligence.
Answer Choices: Select the Correct Answer I, II and III. I and II only. II and III only. I and III only.
Question 2 of 100
Your answer: I, II and III. is correct.
EXPLANATION:
Protection and indemnity coverage would apply to all of these types of losses.
Question 2 of 100
A customer deposits items in a safe deposit box at the bank. These items are missing the next time the customer opens the box. What crime coverage is necessary to cover this loss?
Answer Choices: Select the Correct Answer Safe Depository Guests Property Lessees of Safe Deposit Boxes Extortion-Commercial Entities
Question 3 of 100
Your answer: Safe Depository is correct.
EXPLANATION:
If the bank is legally liable for the loss, the “Safe Depository” coverage form will cover the loss.
Question 3 of 100
A contractor in need of a bid bond to obtain a contract is an example of a(n):
Answer Choices: Select the Correct Answer Principal. Obligee. Surety. Fiduciary.
Question 4 of 100
Your answer: Surety. is incorrect. The correct answer is: Principal. .
EXPLANATION:
A contractor needing a bid bond would be the principal. The bond company is the guarantor and the owner (who receives the benefit of the bond) would be the obligee.
Question 4 of 100
Under the comprehensive coverage of a business auto policy, which of the following would not be a covered loss?
Answer Choices: Select the Correct Answer
After sliding on an icy pavement, a driver hits a guardrail.
Electrical wiring in the vehicle catches fire when the ignition is turned on.
All four tires are removed and a truck is put on blocks while it is parked over the weekend, even though there is no evidence of forcible entry into the company parking lot.
A vehicle has its tires slashed by an undetermined person.
Question 5 of 100
Your answer: Electrical wiring in the vehicle catches fire when the ignition is turned on. is incorrect. The correct answer is: After sliding on an icy pavement, a driver hits a guardrail..
EXPLANATION:
Since the vehicle sustained damage by hitting the guard rail, it is considered a collision claim. This is because the definition of collision includes the upset of a vehicle, its impact with another vehicle or object; anything else would be other than collision and thus be covered by comprehensive coverage.
Question 5 of 100
Which of the following represents an indirect loss?
Answer Choices: Select the Correct Answer
A tree fell on a house, causing a hole in the roof, which later allowed rain to enter
Rain entered a house after a tree fell onto it, later causing mold to develop
Mold developed in a house, later causing the occupants to become very ill
A kitchen fire made a house untenable, causing the occupants to incur hotel charges
Question 6 of 100
Your answer: A kitchen fire made a house untenable, causing the occupants to incur hotel charges is correct.
EXPLANATION:
An indirect loss is the temporary loss of use caused by a direct property loss. A kitchen fire is a direct loss. If that loss is severe enough to make the house unfit to be used, the insured will need to temporarily find an alternative place to live in until repairs to the house are completed. The cost of that temporary replacement - the hotel charge - is the indirect loss.
Question 6 of 100
The standardized Homeowners forms provide ______ for Fire Department Service Charge.
Answer Choices: Select the Correct Answer $1,000 $500 $250 $750
Question 7 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 7 of 100
Which of the following types of losses will NOT be excluded by Ace Building and Materials Company’s CGL policy?
Answer Choices: Select the Correct Answer
Bodily injury to a customer arising out of a forklift being used by the insured
Damage to a forklift owned by others which was in the custody of the insured
Property damage caused to the water system when a forklift dropped a drum of caustic chemicals owned by the insured
Bodily injury to an employee driving a forklift
Question 8 of 100
Your answer: Bodily injury to a customer arising out of a forklift being used by the insured is correct.
EXPLANATION:
The use of mobile equipment on or off the insured’s premises is covered under the CGL policy. Property in the insured’s care, custody or control is excluded. Pollution is also excluded as well as injuries to employees.
Question 8 of 100
Amelia has suffered a covered collision loss to her vehicle. The insurer requires that her vehicle be repaired at a repair shop of the insurer’s choice. The insurer:
Answer Choices: Select the Correct Answer
Is guilty of an unfair claims practice act.
Can make this request.
Waives the deductible, if any, in this case.
Can usually get the work done for less and can help to reduce insurance costs.
Question 9 of 100
Your answer: Can make this request. is incorrect. The correct answer is: Is guilty of an unfair claims practice act..
EXPLANATION:
The insurer can recommend a repair shop, but cannot require that a particular shop be used.
Question 9 of 100
Fidelity bonds which apply coverage to an employee or employees acting in collusion with others are called:
Answer Choices: Select the Correct Answer Commercial blanket bonds. Scheduled bonds. Position bonds. Blanket position bonds.
Question 10 of 100
Your answer: Commercial blanket bonds. is correct.
EXPLANATION:
The commercial blanket bond’s limit applies separately to each employee involved in the loss whether acting alone or in collusion with other employees. However, in case of a loss only the bond limit will apply to the entire loss.
Question 10 of 100
A Businessowners policy has a $500,000 occurrence limit for liability, and a $1,000,000 aggregate limit. If claims for $600,000 and $400,000 have been filed in two separate incidents, how much coverage remains, if any, for future claims submitted during the policy term?
Answer Choices: Select the Correct Answer $500,000 $0 $100,000 $1,000,000
Question 11 of 100
Your answer: $100,000 is correct.
EXPLANATION:
The most the policy will pay for any one single occurrence is $500,000, therefore that amount would be payable for the first loss. Once paid that amount must be subtracted from the Aggregate Limit (the most available for all claims in the policy year) leaving $500,000 remaining in the aggregate. The second claim is within the occurrence limit and because there is enough left in the aggregate, the entire $400,000 is payable. After subtracting the $400,000 loss from the remaining aggregate, $100,000 is left to pay any and all future claims for the remainder of the policy term.
Question 11 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 12 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 12 of 100
How are the HO-2, HO-4 and HO-6 forms similar?
Answer Choices: Select the Correct Answer The perils covered The risk of damage to the dwelling The type of residence insured The property insurance
Question 13 of 100
Your answer: The perils covered is correct.
EXPLANATION:
All three forms use the broad form, named perils approach for covered property. But property insured under these three forms varies to accommodate policyholder’s needs. The HO-2 covers the dwelling building, whereas the HO-4 does not and the HO-6 includes the building coverage as needed by the unit owner.
Question 13 of 100
All of the following are “advertisements” as defined by the California Code of Regulations (CCR), EXCEPT:
Answer Choices: Select the Correct Answer
Any written or printed communication for the purpose of soliciting, describing, or promoting the licensed business of the licensee, including a brochure, letter, pamphlet, newspaper, periodical, publication, or other writing.
A directory listing caused or permitted by the licensee that also indicates his licensed activity.
Any printing or writing on buildings used as the licensee’s place of business or branch office.
A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee.
Question 14 of 100
Your answer: Any printing or writing on buildings used as the licensee’s place of business or branch office. is correct.
EXPLANATION:
“Any printing or writing on buildings used as the licensee’s place of business or branch office” is actually listed as NOT being included in the definition of “advertisement”. All the other answer choices ARE considered “advertisements” according to the CCR. (CCR 2691.17)
Question 14 of 100
On an unendorsed special form BOP, how much coverage is there for theft of money & securities?
Answer Choices: Select the Correct Answer
$5000 on the premises only
$5000 on the premises but only $2500 off
$1000 on and off the premises
Nothing
Question 15 of 100
Your answer: $5000 on the premises but only $2500 off is incorrect. The correct answer is: Nothing.
EXPLANATION:
Even though the special BOP is “open peril” coverage which includes theft, the loss of money and securities are still not a covered form of property. The endorsement for Money & Securities is necessary to cover this exposure.
Question 15 of 100
QUESTION:
All of the following statements are true regarding state Guaranty Associations, EXCEPT:
Answer Choices: Select the Correct Answer
The Association covers the claims of insurers that become insolvent in the state.
The Association assesses admitted insurers a percentage of net premiums written in the state to finance the fund.
The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association.
The fund pays the workers compensation claims of an insolvent insurance in full with no limit.
Question 16 of 100
Your answer: The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association. is correct.
EXPLANATION:
The fund does NOT assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association. In fact, the Association prohibits insurers from advertising that they are a member of the Guaranty Association. COVERED IN INSURANCE FUNDAMENTALS.
Question 16 of 100
Adjusters have a relationship to the legal profession, and must exercise care to avoid the unauthorized practice of law. In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS:
Answer Choices: Select the Correct Answer
He/she is a licensed independent adjuster.
He/she has graduated from an accredited law school.
He/she is an active member of the State Bar of California.
He/she is a licensed public adjuster.
Question 17 of 100
Your answer: He/she is an active member of the State Bar of California. is correct.
EXPLANATION:
In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS he/she is an active member of the State Bar of California.
Question 17 of 100
An application for an independent adjuster license in California must include:
I. The full name and business address of the applicant.
II. A recent photograph of the applicant and one classifiable set of his or her fingerprints.
III. A verified statement of his or her experience qualifications.
IV. A statement as to the classification or classifications under which the applicant desires to be qualified.
Answer Choices: Select the Correct Answer I, II, III and IV I, II and III only I, III and IV only I and II only
Question 18 of 100
Your answer: I, II, III and IV is incorrect. The correct answer is: I, III and IV only.
EXPLANATION:
Two recent photographs of the applicant, of a type prescribed by the Commissioner, and two classifiable sets of his or her fingerprints is required.
Question 18 of 100
Which of the following is NOT needed for rating the premium for an ISO standardized Businessowners policy?
Answer Choices: Select the Correct Answer Square foot area Property coverage amount Protection class Rate group
Question 19 of 100
Your answer: Protection class is incorrect. The correct answer is: Square foot area .
EXPLANATION:
Square footage is not needed in the rating of the premium for the ISO BOP policy, however, square footage DOES play a role in determining the ELIGIBILITY of the risk to be covered under a BOP. The property coverage amount, the protection class, and the rate group all play a role in the premium RATING process.
Question 19 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 20 of 100
Your answer: the insured declaring bankruptcy. is correct.
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 20 of 100
Under the Commercial Building and Personal Property form, all of the following are extensions of coverage, EXCEPT:
Answer Choices: Select the Correct Answer Appraisal. Personal effects. Property Off Premises. Valuable papers.
Question 21 of 100
Your answer: Personal effects. is incorrect. The correct answer is: Appraisal. .
EXPLANATION:
The appraisal clause is not an extension of coverage. This clause is in most, if not all, property insurance contracts to assist in the resolving of disputes between the insured and the insurer as to the value of the damaged property.
Question 21 of 100
If an adjusting firm intends to add a new branch office, what action must be taken?
Answer Choices: Select the Correct Answer
Report the new location to the Commissioner immediately
Report the new location within 30 days
Must first obtain a branch office certificate
No action needs to be taken
Question 22 of 100
Your answer: Must first obtain a branch office certificate is correct.
EXPLANATION:
Adjusters cannot conduct business from any location other than that shown on the records of the Commissioner as his or her place of business unless he or she has received a branch location certificate for that location. A licensee must notify the Commissioner in writing within 10 days after the closing or changing the location of a branch office.
Question 22 of 100
For the insured dwelling and other detached structures, the DP-3 provides:
Answer Choices: Select the Correct Answer
Open peril coverage.
Broad perils coverage.
Basic perils coverage.
Fire, lightning, extended coverage and vandalism & malicious mischief coverage.
Question 23 of 100
Your answer: Broad perils coverage. is incorrect. The correct answer is: Open peril coverage. .
EXPLANATION:
The DP-3 provides open perils protection for the dwelling and other structures, and named perils protection for personal property. The DP-1 and DP-2 forms provide named peril protection only for the dwelling, other structures, and personal property.
Question 23 of 100
Jerusha has her business automobiles covered under a Business Auto policy. She has purchased a new business automobile recently but was not required under her policy provisions to report her newly acquired auto. Based on this information, which BAP symbol is listed on the Declarations page of Jerusha’s policy?
Answer Choices: Select the Correct Answer Symbol 1. Symbol 7. Symbol 5. Symbol 3.
Question 24 of 100
Your answer: Symbol 5. is incorrect. The correct answer is: Symbol 1..
EXPLANATION:
When Symbol 1 is listed on the Declarations page, the insured is not required to report “newly acquired autos” to the insurer. This is because Symbol 1 covers “any auto”.
Question 24 of 100
Which of the following is the type of report indicating the initial results of the investigation of a claim?
Answer Choices: Select the Correct Answer Field Report Interim Report Full Report Claims Report
Question 25 of 100
Your answer: Interim Report is incorrect. The correct answer is: Field Report.
EXPLANATION:
This report can also be called the initial report and is the result of the initial investigation.
Question 25 of 100
All of the following are exclusions under Equipment Breakdown coverage, EXCEPT:
Answer Choices: Select the Correct Answer Sudden and accidental loss. Fire losses. Flood. Wear and tear.
Question 26 of 100
Your answer: Sudden and accidental loss. is correct.
EXPLANATION:
The Equipment Breakdown policy covers sudden and accidental loss. It can be modified to cover indirect loss (loss of income) as a result of a direct loss. The commercial property forms would cover a fire loss as a result of a boiler explosion since this would be an ensuing loss.
Question 26 of 100
An insured auto dealer has purchased a Garage policy with physical damage coverage against specified causes of loss. Which of the following losses will not be covered by the policy?
Answer Choices: Select the Correct Answer
Flood damage to a covered auto.
Vandalism damage to a covered auto.
Damage resulting from the collision of the truck carrying a covered auto with another vehicle.
Explosion.
Question 27 of 100
Your answer: Flood damage to a covered auto. is incorrect. The correct answer is: Damage resulting from the collision of the truck carrying a covered auto with another vehicle..
EXPLANATION:
A specified cause of loss is named perils coverage and collision is not one of the named perils. Collision is a separate physical damage coverage requiring the upset of the covered vehicle, or its impact with another vehicle or object.
Question 27 of 100
The conditions section of an insurance contract specifies which of the following?
I. The property location.
II. The insurance company’s responsibilities.
III. The insured’s responsibilities.
IV. The policy duration.
Answer Choices: Select the Correct Answer II and III only I and II only I and IV only I, II, III and IV
Question 28 of 100
Your answer: I, II, III and IV is incorrect. The correct answer is: II and III only.
EXPLANATION:
The location of the property and policy duration is shown on the declarations page of the policy. The responsibilities of both parties are contained in the conditions section of the contract.
Question 28 of 100
Under the farm forms, theft of certain types of property has a theft coverage limitation. The theft limitation on firearms and other related equipment is:
Answer Choices: Select the Correct Answer $1,500. $500. $3,000. $5,000.
Question 29 of 100
Your answer: $5,000. is incorrect. The correct answer is: $3,000..
EXPLANATION:
The theft limitation on firearms and other related equipment is $3,000.
Question 29 of 100
How may days notice are required in the case of cancellation of an auto policy in California which has been in effect for more than 60 days?
Answer Choices: Select the Correct Answer
20 days, except for 10 days in the case of nonpayment of premium.
30 days, except for 10 days in the case of nonpayment of premium.
45 days, except for 10 days in the case of nonpayment of premium.
10 days in any case.
Question 30 of 100
Your answer: 30 days, except for 10 days in the case of nonpayment of premium. is incorrect. The correct answer is: 20 days, except for 10 days in the case of nonpayment of premium. .
EXPLANATION:
There are only a few legal reasons an insurer may cancel an auto policy that has been in force for 60 days or longer, but when allowed, 20 days notice is required before the cancellation date, unless for nonpayment of premium, in which case 10 days notice is sufficient.
Question 30 of 100
The Fit and Trim Fitness Center wants to reduce its carbon footprint. A covered loss destroys some treadmills, damages the roof and most of the interior walls. Fit and Trim finds replacement treadmills that generate and actually return energy to the power grid. The cost is 15% higher than standard equipment. Which of the following, if any, would pay the increase?
Answer Choices: Select the Correct Answer
Ordinance and Law Coverage
Fungi, Wet and Dry Rot
Increased cost of loss and related expenses for “green” updates
Consequential Loss Coverage
Question 31 of 100
Your answer: Increased cost of loss and related expenses for “green” updates is correct.
EXPLANATION:
The increased cost of loss and related expenses for green updates will pay an extra 25% of the property loss for the increased cost to “go green” up to $100,000 maximum.
Question 31 of 100
What is “break-bulk” cargo as respects ocean marine cargo coverage?
Answer Choices: Select the Correct Answer Loose cargo, such as cartons. Containerized cargo. Bulk shipments. Tanker cargo.
Question 32 of 100
Your answer: Bulk shipments. is incorrect. The correct answer is: Loose cargo, such as cartons. .
EXPLANATION:
Break bulk cargo refers to loose cargo, such as cartons or boxes, that are stowed directly (or placed on pallets) in the ship’s hold, as opposed to containerized cargo or bulk shipments.
Question 32 of 100
A non-waiver agreement would allow the insurance company to do which of the following?
Answer Choices: Select the Correct Answer
Hire an attorney to protect its rights
Decline to investigate the claim due to policy exclusions
Investigate the loss without verifying that the loss is covered
Hire a public adjuster to provide a second opinion
Question 33 of 100
Your answer: Investigate the loss without verifying that the loss is covered is correct.
EXPLANATION:
Insurers can use a non-waiver agreement when there is a question about coverage or limits. In such a signed agreement, the claimant/policyholder stipulates and acknowledges that the insurer’s continued investigation into and the adjustment of the loss is not to be construed as an admission of coverage by the insurer.
Question 33 of 100
Which of the following homeowner forms offers the broadest coverage?
Answer Choices: Select the Correct Answer HO-1 HO-3 HO-5 HO-2
Question 34 of 100
Your answer: HO-2 is incorrect. The correct answer is: HO-5.
EXPLANATION:
The HO-5 is the broadest homeowner form. It provides open peril coverage on both buildings and contents.
Question 34 of 100
Tommy’s Tip Top TV Store is delivering a new flat screen TV to Jerry’s house. The delivery people set the TV down on the floor in the hallway to get a better grip. While picking it up, the TV makes deep scratches in the wood floor. How will the business auto policy for Tommy’s Tip Top TV Store respond to Jerry’s demand for damage to his floor?
Answer Choices: Select the Correct Answer
There is no coverage for the damage to the floor.
The damage to the floor is covered under the liability coverage of the business auto form.
The damage to the floor is covered under the CGL form.
The damage must result from an auto accident before coverage will apply.
Question 35 of 100
Your answer: The damage to the floor is covered under the liability coverage of the business auto form. is correct.
EXPLANATION:
The business auto form provides property damage liability coverage caused by the unloading or loading of property from the time it is picked up until the time it is delivered to its final destination.
Question 35 of 100
Which of the following losses is NOT excluded under the Physical Damage coverage of a personal auto policy?
Answer Choices: Select the Correct Answer
Damage to a covered auto while being used as part of a car pool.
Damage to equipment designed for the detection of radar.
Loss caused by freezing of the cooling system.
Loss of custom furnishings in a customized van.
Question 36 of 100
Your answer: Damage to equipment designed for the detection of radar. is incorrect. The correct answer is: Damage to a covered auto while being used as part of a car pool. .
EXPLANATION:
An exception is made in the policy to allow coverage while the vehicle is involved in a car pool. Coverage is excluded if the vehicle is used as a livery. The other three choices are excluded. Coverage for the custom furnishings in a van must be added by endorsement.
Question 36 of 100
A change in the Qualified Manager of a California independent adjusting business must be reported to the Department of Insurance within ____ days of such change.
Answer Choices: Select the Correct Answer 30 20 15 10
Question 37 of 100
Your answer: 30 is correct.
EXPLANATION:
The change must be reported within 30 days.
Question 37 of 100
Workers compensation insurance is a contract between:
Answer Choices: Select the Correct Answer Employer and employee. State and employer. Insurance company and the employee. Insurance company and the employer.
Question 38 of 100
Your answer: State and employer. is incorrect. The correct answer is: Insurance company and the employer..
EXPLANATION:
Workers compensation coverage is a contract between the insurance company and the employer. It is the employer that contracts with the insurance company to provide the statutorily required workers compensation benefits for the injured employee.
Question 38 of 100
Which of the following would be excluded under Personal and Advertising Injury Liability Coverage of a CGL policy?
I. Breach of contract.
II. Incorrect price descriptions of goods, products or services.
III. Failure of goods, products or services to perform as advertised.
IV. Any offense committed by an insured who is in the business of advertising or publishing.
Answer Choices: Select the Correct Answer I, II, III, and IV I and II only II and III only I, II, and III only
Question 39 of 100
Your answer: I, II, and III only is incorrect. The correct answer is: I, II, III, and IV.
EXPLANATION:
CGL Coverage B-Personal and Advertising Injury Liability excludes coverage for anyone in the advertising business and excludes claims for breach of contract, incorrect prices on goods, and failure of goods to perform as advertised.
Question 39 of 100
What insurers must participate in accepting business under the California FAIR Plan?
Answer Choices: Select the Correct Answer
All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies.
Companies who specialize in difficult or hard to place property insurance.
Only those property insurers holding a certificate of authority for 5 years or less in California.
Only those insurers wanting to enter California and have received approval from their board of directors.
Question 40 of 100
Your answer: All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies. is correct.
EXPLANATION:
The purpose of the FAIR Plan is designed to provide a market for those property owners who are unable to obtain insurance through the normal market. Therefore, the California legislature enacted legislation requiring the participation of admitted insurers licensed to write property insurance to participate.
Question 40 of 100
