IA Test 25 Flashcards
A commercial umbrella liability policy with a supplemental reporting period extends the period for reporting claims to:
Answer Choices: Select the Correct Answer
A period specified in the policy.
60 days following expiration of the policy.
Five years or inception of a new policy, whichever comes first.
An unlimited period following expiration of the policy.
Question 1 of 100
Your answer: 60 days following expiration of the policy. is incorrect. The correct answer is: An unlimited period following expiration of the policy. .
EXPLANATION:
When this option is purchased, coverage is provided for “claims made” for an unlimited period following the expiration date of the policy. The damages must have occurred before the expiration date of the policy.
Question 1 of 100
The crew of a ship is guilty of fraud with the intention of reaping gains at the expense of the owner. In ocean marine coverage, what is this called?
Answer Choices: Select the Correct Answer Perils of the sea Jettison General average Barratry
Question 2 of 100
Your answer: Barratry is correct.
EXPLANATION:
Barratry means fraud by the master or the crew with the intention of reaping gains at the expense of the owner. Examples include setting the ship on fire, diverting the ship from its course, or embezzlement of the cargo.
Question 2 of 100
In California, the class of insurance that provides coverage against loss of property and liability for damage to persons or property from explosion of, or accident to, boilers, tanks, pipes, pressure vessels, engines, wheels, electrical machinery, or apparatus connected them, is known as:
Answer Choices: Select the Correct Answer Marine insurance. Fire insurance. Mechanical Breakdown insurance. Boiler & Machinery insurance.
Question 3 of 100
Your answer: Boiler & Machinery insurance. is correct.
EXPLANATION: In California, the class of insurance that provides coverage against loss of property and liability for damage to persons or property from explosion of, or accident to, boilers, tanks, pipes, pressure vessels, engines, wheels, electrical machinery, or apparatus connected them, is known as Boiler & Machinery insurance. In most states, this type of insurance is now referred to as Equipment Breakdown insurance. Mechanical Breakdown insurance covers automobile breakdowns.
Question 3 of 100
Julian owns a automobile repair shop. He purchases a policy that covers his customer’s automobiles while they are in his care, if they suffer damage by fire, theft, vandalism or collision. Which of the following policies did Julian purchase?
Answer Choices: Select the Correct Answer Garagekeepers Legal Liability Insurance Garage Liability Insurance On-Hook Towing Insurance Commercial Automobile Insurance
Question 4 of 100
Your answer: Garagekeepers Legal Liability Insurance is correct.
EXPLANATION:
Garagekeepers Legal Liability protects the automobiles of a customer for physical damage coverage while the auto is parked or stored at the covered location.
Question 4 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 5 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 5 of 100
Claims adjusters have a close relationship to the legal profession, but must be careful not to become involved in the unauthorized practice of law. Which of the following would be an example of an adjuster who is engaged in the unauthorized practice of law?
Answer Choices: Select the Correct Answer
The adjuster has transmitted settlement offers on behalf of the principal.
The adjuster has managed claims in compliance with their state’s adopted Unfair Claim Settlement laws.
The adjuster has expressed an opinion, formed from a factual analysis, regarding the extent of damage or injury.
The adjuster has drafted the legally binding settlement papers on a claim.
Question 6 of 100
Your answer: The adjuster has drafted the legally binding settlement papers on a claim. is correct.
EXPLANATION:
Adjuster are not permitted to draft any document that is intended to have a legally binding effect.
Question 6 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 7 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 7 of 100
Which of the following coverages is NOT provided by the Farm Employers Liability and Farm Employees Medical Payments insurance endorsement?
Answer Choices: Select the Correct Answer
Pays statutory workers’ compensation benefits.
Pays medical payments to an injured farm employee.
Provides employers legal liability coverage where a bodily injury has occurred to an employee.
Provides defense coverage to the farm owner as a result of an injured employee who brings a legal action.
Question 8 of 100
Your answer: Pays statutory workers’ compensation benefits. is correct.
EXPLANATION:
This endorsement offers farm employers liability coverage and farm employees medical payments insurance. It can be attached to FL 00 20 or to the CGL form. FL 04 65 offers to pay those sums that the insured becomes legally obligated to pay as damages because of BI sustained by a farm employee arising out of and in the course of employment by the insured. And, the endorsement offers to pay to or for each farm employee who sustains BI caused by an accident, all reasonable medical expenses to which the insurance applies. FL 04 65 basically combines the employers liability coverage from a workers comp policy with med pay coverage. This endorsement does not provide statutory workers compensation benefits.
Question 8 of 100
Which of the following losses would be covered under commercial auto physical damage coverage?
Answer Choices: Select the Correct Answer
Fire
Loss to equipment used for radar or laser detection
Losses resulting from wear and tear
Loss caused by war or military action
Question 9 of 100
Your answer: Fire is correct.
EXPLANATION:
Fire is covered and the other choices are excluded.
Question 9 of 100
The custom farming endorsement should be attached to a farmowner policy when the annual receipts are at least _____for farming for others.
Answer Choices: Select the Correct Answer $5,000 $4,000 $10,000 $7,500
Question 10 of 100
Your answer: $5,000 is correct.
EXPLANATION:
The custom farming endorsement is used when a farmer is farming for others and the receipts exceed $5,000 per year.
Question 10 of 100
All of the following injuries occurring on the job would probably be deemed compensable, EXCEPT:
Answer Choices: Select the Correct Answer
A cerebral hemorrhage occurring at work and caused from years of high blood pressure.
A back injury resulting from lifting a heavy object with another employee.
A heart attack from overexertion while moving an object at work.
A foot injury caused by a fellow employee running over it with a tow motor.
Question 11 of 100
Your answer: A cerebral hemorrhage occurring at work and caused from years of high blood pressure. is correct.
EXPLANATION:
A cerebral hemorrhage that occurred from years of having high blood pressure is not an injury that arose out of and in the course of employment. This would not be covered under workers compensation.
Question 11 of 100
In California, a Homeowners policy may be cancelled during the 60-day underwriting period, and for the reasons acceptable by law, if a notice of _____ is provided to the insured.
Answer Choices: Select the Correct Answer 20 days. 30 days. 45 days. 10 days.
Question 12 of 100
Your answer: 20 days. is correct.
EXPLANATION:
In California, when a Homeowners policy is still within the 60-day underwriting period, the insurance company can cancel the policy if a 20-day notice is provided to the insured.
Question 12 of 10
A 2 to 4-Family Dwelling is covered under the NFIP for incidental occupancies if it occupies less than:
Answer Choices: Select the Correct Answer
25% of the building’s replacement cost value.
25% of the building’s actual cash value.
25% of the building’s total floor area.
25% of the building’s common living areas.
Question 13 of 100
Your answer: 25% of the building’s total floor area. is correct.
EXPLANATION:
The NFIP provides coverage for incidental occupancies for a 2 to 4-Family Dwelling if it occupies less than 25% of the building’s total floor area.
Question 13 of 100
Which of the following is excluded under the Ordinance or Law Endorsement form?
Answer Choices: Select the Correct Answer
The cost to comply with any ordinance or law requiring a higher grade of pipe to be used in a home’s plumbing system.
The cost to comply with any ordinance or law regulating or enforcing the type of insulation that may be used in the attics of homes located in the jurisdiction.
The cost to comply with any ordinance or law requiring that handrails be installed on any porch that is greater than 2 feet in height, and is attached to the covered dwelling.
The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants.
Question 14 of 100
Your answer: The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants. is correct.
EXPLANATION:
The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants is excluded under the Ordinance or Law endorsement.
Question 14 of 100
Bob is purchasing a commercial property policy to cover contents of a building valued at $100,000. The policy includes an 80 percent coinsurance clause. To avoid a coinsurance penalty in the event of a partial loss, Bob should purchase a policy with minimum limits of at least:
Answer Choices: Select the Correct Answer $80,000 $100,000 $90,000 $20,000
Question 15 of 100
Your answer: $80,000 is correct.
EXPLANATION:
The value of the covered property is ($100,000) times 80% = $80,000.
Question 15 of 100
All of the following describe one of the four elements of a negligent act, EXCEPT:
Answer Choices: Select the Correct Answer
The defendant had a legal duty to perform in a given manner but did not.
The loss or injury to the plaintiff was a direct result of the breach of duty by the defendant.
The defendant entered into a legal contract with the plaintiff.
The plaintiff suffered actual loss of injury due to the defendant’s action or inaction.
Question 16 of 100
Your answer: The defendant entered into a legal contract with the plaintiff. is correct.
EXPLANATION:
There would be nothing negligent about the defendant and claimant entering into a legal contract.
Question 16 of 100
The auto liability limits $100/300/50 are an example of:
Answer Choices: Select the Correct Answer Split limits. Single limits. Aggregate limits. Occurrence limits.
Question 17 of 100
Your answer: Occurrence limits. is incorrect. The correct answer is: Split limits. .
EXPLANATION:
This is an example of a split limit. Separate limits apply to bodily injury per person, bodily injury per accident, and property damage per accident.
Question 17 of 100
Which of the following may cancel a Commercial Package Policy?
Answer Choices: Select the Correct Answer
The first named insured
Any named insured
The agent of record
None of the responses listed are correct
Question 18 of 100
Your answer: The first named insured is correct.
EXPLANATION:
The first named insured as well as the insurer may cancel a Commercial Package Policy.
Question 18 of 100
Submit
In California, it is permissible for a automobile insurer to request photographs of a damaged vehicle in lieu of performing a physical inspection. With first party claims, the insurer must request the photographs from the claimant:
Answer Choices: Select the Correct Answer
Within 7 calendar days after receiving the notice of claim.
Within 6 business days after receiving the notice of claim.
Within 3 business days after receiving the notice of claim.
Within 4 calendar days after receiving the notice of claim.
Question 19 of 100
Your answer: Within 7 calendar days after receiving the notice of claim. is incorrect. The correct answer is: Within 3 business days after receiving the notice of claim..
EXPLANATION:
The insurer must request the photographs within 3 business days after receiving the claims notice.
Question 19 of 100
Which of the following is the amount of coverage provided on an attached garage of a home insured under an HO-3 for $100,000?
Answer Choices: Select the Correct Answer $25,000 $20,000 No additional coverage $10,000
Question 20 of 100
Your answer: No additional coverage is correct.
EXPLANATION:
A garage attached to a dwelling is considered to be one structure therefore, no additional coverage over and above the $100,000 is provided. If the structure were a separate structure it would be covered for an additional $10,000.
Question 20 of 100
The purpose of asking the court to make a declaratory judgment is:
Answer Choices: Select the Correct Answer
To make a binding decision as to the relationship between the parties and their rights with respect to the matter before the court.
To avoid going to court with a lawsuit.
To make a final decision as to who is liable.
To make a final decision as to damages.
Question 21 of 100
Your answer: To make a final decision as to who is liable. is incorrect. The correct answer is: To make a binding decision as to the relationship between the parties and their rights with respect to the matter before the court. .
EXPLANATION:
A declaratory judgment is a binding judgment issued by the court that defines the legal relationship between the parties and their rights with respect to the matter before the court. A declaratory judgment does not provide for the enforcement of the judgment. However, a question of coverage is one of the purposes to request a declaratory judgment from a court.
Question 21 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 22 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 22 of 100
Under the commercial property condominium association form, coverage is based on:
Answer Choices: Select the Correct Answer The commercial property form The association agreement and bylaws The special cause of loss form State and local ordinances
Question 23 of 100
Your answer: The association agreement and bylaws is correct.
EXPLANATION:
The coverage provided by the form will be based on the condominium association agreement and by laws.
Question 23 of 100
Which of the following pollution losses would be covered by Garage policy liability coverage?
Answer Choices: Select the Correct Answer
Pollution of a stream caused by gasoline leaking from the ruptured fuel tank of a covered auto following a collision.
Escape of toxic sludge from a dump site used by the named insured to store waste produced in its garage operations.
The cost of a governmentally ordered clean-up of the pollution from a dump site used by the named insured.
None of the losses described would be covered.
Question 24 of 100
Your answer: Pollution of a stream caused by gasoline leaking from the ruptured fuel tank of a covered auto following a collision. is correct.
EXPLANATION:
The policy would provide pollution liability in the case of escaped fluids and fuels as a result of an accident. The other choices are excluded.
Question 24 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 25 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 25 of 100
Property with no occupants or contents is considered to be _____ whereas property with no occupants but with contents is considered:
Answer Choices: Select the Correct Answer Occupied/Unoccupied Rented/Unrented Vacant/Unoccupied Unrestricted/Restricted
Question 26 of 100
Your answer: Vacant/Unoccupied is correct.
EXPLANATION:
Vacancy means the building is void of contents and people. The building is simply not being used. Perils such as freezing, vandalism and malicious mischief are limited when a building is vacant. Unoccupancy means the premises are void of people but has contents. In most cases, unoccupancy will not affect the coverage provided by the policy.
Question 26 of 100
Each of the following is true about commercial property floaters filed by the Insurance Service Office (ISO), EXCEPT:
Answer Choices: Select the Correct Answer
The rates for these coverages are unregulated.
Individual insurers are not required to use the ISO forms.
The coverages may be written as a monoline or part of a package policy.
The coverages are usually written on an open perils basis.
Question 27 of 100
Your answer: The rates for these coverages are unregulated. is correct.
EXPLANATION:
Rates for Commercial Property Floaters filed with ISO are regulated. Each type of form requires a rating formula. These are audited by ISO. There are many forms, not filed with ISO, where the rates are not regulated. These are called “non-controlled” lines of insurance.
Question 27 of 100
When the Personal Liability Supplement is purchased as a monoline policy, all of the following are required conditions, EXCEPT:
Answer Choices: Select the Correct Answer Assignment. Liberalization. Death. Bankruptcy.
Question 28 of 100
Your answer: Bankruptcy. is correct.
EXPLANATION:
There is not a condition in the Personal Liability policy outlining what the insured must do in case of bankruptcy.
Question 28 of 100
Loss of rental income on an apartment building caused by an insured peril is best described as:
Answer Choices: Select the Correct Answer
A direct loss.
A loss that can never be covered under a Commercial Property policy.
A consequential loss.
A loss that would be covered only if the fire was friendly.
Question 29 of 100
Your answer: A consequential loss. is correct.
EXPLANATION:
Consequential losses include time element losses. This coverage provides loss of income incurred by a business that is caused by a direct loss from an insured peril.
Question 29 of 100
David has damaged his vehicle by striking a tree. He can:
I. Take the car to a repair garage recommended by the insurer.
II. Take the car to a garage of his choice.
III. Accept payment based on the adjuster’s estimate.
Answer Choices: Select the Correct Answer
I, II and III
I and II only
I and III only
I only
Question 30 of 100
Your answer: I, II and III is correct.
EXPLANATION:
The choice belongs to the David, the insured.
Question 30 of 100
The plumbing in Mrs. Jones’ home suddenly burst and the ceilings were damaged by water. All of the following Homeowners forms would cover the loss, EXCEPT an:
Answer Choices: Select the Correct Answer HO-2 form. HO-8 form. HO-3 form. HO-5 form.
Question 31 of 100
Your answer: HO-8 form. is correct.
EXPLANATION:
All HO forms (except the HO-8) cover “Accidental Discharge or Overflow of Water or Steam” from a plumbing, heating, air conditioning, or fire protective sprinkler system or from within a household appliance.
Question 31 of 100
The Common Policy Conditions apply to which coverage parts of a Commercial Package Policy?
Answer Choices: Select the Correct Answer All parts of the policy. The property insurance coverages. The optional insurance coverages. The liability insurance coverages.
Question 32 of 100
Your answer: All parts of the policy. is correct.
EXPLANATION:
With a Commercial Package Policy, the Common Policy Conditions apply to all of the coverage parts.
Question 32 of 100
Which of the following is not an “additional coverage” under Homeowners Liability – Section II coverage?
Answer Choices: Select the Correct Answer
Payments made by the insurer to settle a claim.
Interest accruing after a legal judgment is entered.
The insurer’s costs to investigate a claim.
Damage to Property of Others.
Question 33 of 100
Your answer: Payments made by the insurer to settle a claim. is correct.
EXPLANATION:
Settlements paid by the insurer come from the limits of liability shown on the Declarations page and are not an “additional coverage.”
Question 33 of 100
What is the purpose of an adjuster’s interim report?
Answer Choices: Select the Correct Answer
To report on the ongoing status of the claim.
To render a final opinion on the claim.
To provide the status on all releases.
To provide final estimates of the damages claimed.
Question 34 of 100
Your answer: To report on the ongoing status of the claim. is correct.
EXPLANATION:
This report merely provides the status of a claim prior to finalization.
Question 34 of 100
The premiums for workers compensation are based on:
Answer Choices: Select the Correct Answer
The job description of the employees (the work they perform).
The location of the risk.
The state schedule of benefits.
Claim loss ratio.
Question 35 of 100
Your answer: The job description of the employees (the work they perform). is correct.
EXPLANATION:
The premium is based on the job description of the employee. The more hazardous the work the higher the base rate per $100 of payroll.
Question 35 of 100
Miranda’s home is covered under a Homeowners policy with an Earthquake Endorsement attached. She has selected the base deductible of 5% and her limit of liability under Coverage C is greater than Coverage A. Her Coverage C limit of liability is $1,000. What is the deductible that Miranda will have to pay?
Answer Choices: Select the Correct Answer $50 $5 $5,000 $500
Question 36 of 100
Your answer: $500 is correct.
EXPLANATION:
Although 5% multiplied by $1,000 is $50, the endorsement states that the deductible will never be less than $500.
Under “Coverage A - Building” of the BOP form, which of the following is NOT covered?
Answer Choices: Select the Correct Answer
Completed additions, and additions under construction
All permanently installed fixtures, machinery and equipment
Outdoor fixtures
Valuable papers and records
Question 37 of 100
Your answer: Valuable papers and records is correct.
EXPLANATION:
Valuable papers and records are NOT included in Coverage A - Building. If business personal property is insured there is a limited amount of coverage ($10,000) provided under the extensions of coverage. Permanently installed fixtures, machinery, and equipment, outdoor fixtures, and completed additions and additions under construction are all considered “buildings” by definition.
Question 37 of 100
Which of the following is true regarding the homeowners HO-5 form?
Answer Choices: Select the Correct Answer
Provides open peril coverage on buildings and broad form peril coverage on their contents
Provides open peril coverage on the buildings and their contents
Provides broad form peril coverage on the buildings and their contents
Provides broad form peril coverage on the buildings and named peril coverage on their contents
Question 38 of 100
Your answer: Provides open peril coverage on buildings and broad form peril coverage on their contents is incorrect. The correct answer is: Provides open peril coverage on the buildings and their contents.
EXPLANATION:
The HO-5 form provides open peril coverage on the dwelling, other detached structures and personal property of the insured.
Question 38 of 100
According to the nationwide marine definition as adopted in this state, which of the following structures may be written under an inland marine insurance form?
Answer Choices: Select the Correct Answer Bridges and Piers Occupied Dwellings Oceangoing Hulls Warehouses
Question 39 of 100
Your answer: Bridges and Piers is correct.
EXPLANATION:
Usually we think of inland marine as applying to non-stationary items. Bridges and piers and several others are exceptions to the rule.
Question 39 of 100
Which of the following businesses would be eligible for a Businessowners policy?
Answer Choices: Select the Correct Answer
A dental office.
A contractors business that provides insulation services.
A savings and loan.
A small wig manufacturing business.
Question 40 of 100
Your answer: A dental office. is correct.
EXPLANATION:
A dental office is the only business listed that would be eligible for coverage under a Businessowners policy. Manufacturing businesses are generally not accepted for BOP coverage due to the “Products” liability exposure. The contractor providing insulation services would not be eligible for a Businessowners policy due to the risk involved in performing the service. The savings and loan would not be covered due to the large crime risk.
Question 40 of 100
