IA Test 28 Flashcards
“Sinkhole collapse” is a peril covered under which of the following ISO Commercial Property Cause of Loss forms?
Answer Choices: Select the Correct Answer The Basic, Broad and Special forms. The Broad only. The Broad and Special only. The Special only.
Question 1 of 100
Your answer: The Basic, Broad and Special forms. is correct.
EXPLANATION:
Even the Basic Form provides this coverage.
Question 1 of 100
Which of the following contractors would be eligible for a Businessowners policy?
Answer Choices: Select the Correct Answer
A carpenter doing all of his own work building kitchen cabinets in people’s homes and earns $75,000 per year.
A general contractor.
A roofing contractor with an annual payroll of $400,000.
A tree removal service.
Question 2 of 100
Your answer: A general contractor. is incorrect. The correct answer is: A carpenter doing all of his own work building kitchen cabinets in people’s homes and earns $75,000 per year. .
EXPLANATION:
The BOP is a commercial package policy that provides property and liability insurance to certain types of small businesses. Some small businesses, such as tree removal services, are not eligible. General contractors and contractors with annual payroll in excess of $300,000 are also ineligible.
Question 2 of 100
Which of the following is NOT considered to be a consequential loss coverage under Commercial Property insurance?
Answer Choices: Select the Correct Answer Replacement Cost Coverage Business Income Coverage Leasehold Interest Coverage Extra Expense Coverage
Question 3 of 100
Your answer: Extra Expense Coverage is incorrect. The correct answer is: Replacement Cost Coverage.
EXPLANATION:
A consequential loss occurs as the result of a direct loss to the insured property. Replacement cost coverage is used to determine the amount of the loss. If replacement cost coverage is not selected then actual cash value applies.
Question 3 of 100
How would you classify the disability for a back sprain suffered at work?
Answer Choices: Select the Correct Answer Temporary, partial Temporary, total Permanent, partial Permanent, total
Question 4 of 100
Your answer: Temporary, total is correct.
EXPLANATION:
An employee with a strained back will be temporarily unable to perform any work, but would be expected to recover; thus, the disability would be temporary total.
Question 4 of 100
Tea is applying for a new adjuster license in California. What is the fee she will need to submit with her license application?
Answer Choices: Select the Correct Answer $47 $56 $72 $29
Question 5 of 100
Your answer: $72 is correct.
EXPLANATION:
The application fee for an original license is: $72. (CIC 14097)
Question 5 of 100
Which of the following statements are true regarding eligibility for “low cost automobile insurance” in California?
Answer Choices: Select the Correct Answer
All of the Statements Listed are True
Low cost automobile is now available in all the counties of California as the need is determined by the Commissioner.
Eligibility is Based on Income
Gross annual income of the household is equal to or less than 250% of the federal poverty level.
Question 6 of 100
Your answer: All of the Statements Listed are True is correct.
EXPLANATION:
All of the statements are true regarding eligibility for low cost automobile insurance in California.
Question 6 of 100
Fidelity bonds which apply their “limit” to each employee involved in a covered loss are called:
Answer Choices: Select the Correct Answer Commercial blanket bonds. Scheduled bonds. License and bid bonds. Blanket position bonds.
Question 7 of 100
Your answer: Blanket position bonds. is incorrect. The correct answer is: Commercial blanket bonds..
EXPLANATION:
When written on a scheduled or position basis, the bond limit applies per employee or position. When written this way, the definition of “occurrence” is changed to mean all losses caused by each employee. However, the limit of the commercial crime form applies per loss regardless of the number of employees involved in the loss.
Question 7 of 100
Which of the following is covered under the broad form farmowners policy that is not covered under the basic form farmowners policy?
Answer Choices: Select the Correct Answer Accidental shooting of livestock Flood damage to structures Collision Earthquake
Question 8 of 100
Your answer: Accidental shooting of livestock is correct.
EXPLANATION:
Accidental shooting of livestock, as well as electrocution of covered livestock, drowning of livestock and accidents involving livestock while loading and unloading are covered by the broad form and not covered by the basic form.
Question 8 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 9 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 9 of 100
Don Davis seeks coverage for his manufacturing company to include Premises Liability, Products Liability, Insured Contracts, and Completed Operations. Which of the following policies would cover all of these loss exposures?
Answer Choices: Select the Correct Answer Commercial General Liability Products and Completed Operations Manufacturers and Contractors Contractual Liability
Question 10 of 100
Your answer: Commercial General Liability is correct.
EXPLANATION:
All of these exposures can be included in the Commercial General Liability contract. Products Liability and Completed Operations coverages are optional.
Question 10 of 100
Your answer: Commercial General Liability is correct.
EXPLANATION:
All of these exposures can be included in the Commercial General Liability contract. Products Liability and Completed Operations coverages are optional.
Question 10 of 100
Your answer: A $500 diamond ring is stolen is incorrect. The correct answer is: The insured hits and damages his fence with his car..
EXPLANATION:
The HO-2 policy is a named peril form and does not provide coverage for the insured damaging his own fence with his car. If someone else, who is not a resident of the household, strikes the fence with their vehicle there is coverage under the HO forms. The HO-3 and HO-5 would cover this loss because it is not excluded.
Question 11 of 100
A tenant leases space in a building. The tenant’s space is damaged by fire. When will the Commercial Property policy pay for the damage?
Answer Choices: Select the Correct Answer
When the owner of the building submits proof of loss for the damage
If the tenant pays for the damage
Will only pay if the lease agreement charges the tenant with the repairs
Will not pay
Question 12 of 100
Your answer: When the owner of the building submits proof of loss for the damage is correct.
EXPLANATION:
When the owner of the building submits a proof of loss for the damage and the loss is paid.
Question 12 of 100
The Earthquake Endorsement will provide coverage to the dwelling and/or personal property with the deductible stated as:
Answer Choices: Select the Correct Answer
$1,000
5% of the limit that applies to all Section I coverages.
$500
$2,500
Question 13 of 100
Your answer: 5% of the limit that applies to all Section I coverages. is correct.
EXPLANATION:
The Earthquake Endorsement has a base deductible is 5% of the limit that applies to all Section I coverages, but never less than $500.
Question 13 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 14 of 100
Your answer: Immediately is correct.
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 14 of 100
What is the procedure for an insured to refuse uninsured motorist coverage in California?
Answer Choices: Select the Correct Answer
The insured must advise the insurer in writing that he or she does not want the coverage.
The insured may advise the Insurance Department that he or she does not want the coverage.
The insured may phone the insurance agent and decline the coverage.
The insured may phone the insurance company and decline the coverage.
Question 15 of 100
Your answer: The insured must advise the insurer in writing that he or she does not want the coverage. is correct.
EXPLANATION:
According to the California Insurance Code (CIC 11580.2), prior to issuance or renewal of the policy the insured must state in writing that he or she does not want the coverage.
Question 15 of 100
Submit
An insured’s work is considered a “completed operation” under the CGL policy when:
Answer Choices: Select the Correct Answer
The operations at any single job site have been completed.
Any part of the insured’s work is put to its intended use.
The entire operation, at all job sites, is completed.
All of the responses are correct.
Question 16 of 100
Your answer: All of the responses are correct. is correct.
EXPLANATION:
All of the responses reflect when operations liability coverage ceases and completed operations coverage begins.
Question 16 of 100
Under the business auto policy, the endorsement used to protect the owner of a leased vehicle is:
Answer Choices: Select the Correct Answer Named Owner endorsement Employers Non Owned Auto Joint Ownership Endorsement Additional Insured – Lessor
Question 17 of 100
Under the business auto policy, the endorsement used to protect the owner of a leased vehicle is:
Answer Choices: Select the Correct Answer Named Owner endorsement Employers Non Owned Auto Joint Ownership Endorsement Additional Insured – Lessor
Question 17 of 100
The California Insurance Code (CIC) further details the items required on a valid insurance contract. All of the following are required, EXCEPT:
Answer Choices: Select the Correct Answer The parties to the contract. The insured's mailing address. The objects of insurance. The policy period.
Question 18 of 100
Your answer: The objects of insurance. is incorrect. The correct answer is: The insured’s mailing address..
EXPLANATION:
The California Insurance Code (CIC) requires six specific items of information be included in an insurance policy issued in California. The insured’s mailing address is not one of them.
Question 18 of 100
Under the terms of a Homeowners policy, which of the following is a mortgagee permitted to do if the insured fails to pay his or her Homeowners policy premium?
Answer Choices: Select the Correct Answer
Cancel the Homeowners policy.
Pay the premium for the insured.
Issue a new Homeowners policy for the insured.
Foreclose on the insured’s property.
Question 19 of 100
Your answer: Issue a new Homeowners policy for the insured. is incorrect. The correct answer is: Pay the premium for the insured..
EXPLANATION:
The mortgagee has the right to pay the premium if the insured fails to do so.
Question 19 of 100
Under an HO-4, which of the following would be covered?
Answer Choices: Select the Correct Answer
The insured’s contents and personal liability
The dwelling
A detached garage
Excess jewelry coverage
Question 20 of 100
Your answer: Excess jewelry coverage is incorrect. The correct answer is: The insured’s contents and personal liability.
EXPLANATION:
The HO-4 is designed for apartment dwellers or those that live in a rented dwelling. Since they do not own the structures, no coverage is needed to cover the real property.
Question 20 of 100
Inland Marine insurance is commonly used to insure all of the following, EXCEPT:
Answer Choices: Select the Correct Answer Automobiles. Stamps. Camera equipment. Jewelry.
Question 21 of 100
our answer: Stamps. is incorrect. The correct answer is: Automobiles. .
EXPLANATION:
Autos are best covered under an automobile policy.
Question 21 of 100
A business owner would be covered for wrongful eviction, defamation of character, false arrest, and malicious prosecution under which of the following Commercial General Liability coverage part?
Answer Choices: Select the Correct Answer Completed operations. Contractual liability. Strict liability. Personal and Advertising Injury.
Question 22 of 100
Your answer: Personal and Advertising Injury. is correct.
EXPLANATION:
The “Personal and Advertising Injury” coverage of the CGL policy would cover a business owner for wrongful eviction, defamation of character, false arrest, and malicious prosecution.
Question 22 of 100
Under a Commercial Auto policy with respect to physical damage to a covered vehicle, which of the following is true regarding diminution of value?
Answer Choices: Select the Correct Answer
It is specifically excluded.
It is covered.
The deductible is waived.
The renewal premium is reduced for physical damage coverages on the damaged vehicle.
Question 23 of 100
Your answer: The deductible is waived. is incorrect. The correct answer is: It is specifically excluded..
EXPLANATION:
A decrease in the value because of an accident is not a covered loss in most states. The policy excludes this decrease in value when a covered vehicle has been damaged and causes a decrease in value even though it has been repaired.
Question 23 of 100
Which section of the Commercial Package Policy varies based on the lines of coverage included?
Answer Choices: Select the Correct Answer
Coverage Part.
Common Policy Conditions.
Common Policy Declarations.
None of the responses listed are correct.
Question 24 of 100
Your answer: Coverage Part. is correct.
EXPLANATION:
Each line of insurance that is eligible for the Commercial Package Policy has its own coverage part consisting of a variety of mandatory and optional forms that are used to provide the coverage desired.
When an insured is fulfilling the duty of proving a loss by taking an inventory of the damaged property, who pays the expenses incurred by the insured?
Answer Choices: Select the Correct Answer
The insured.
The insurer.
The adjuster will provide funds to pay for these expenses.
Who pays these expenses will be negotiated at the settlement of the claim.
Question 25 of 100
Your answer: The insured. is correct.
EXPLANATION:
The insured is instructed to “keep a record of your expenses for emergency and temporary repairs, for consideration in the settlement of the claim.” Reasonable expenses paid by the insured to protect the property from further loss are the obligation of the insurer. Thus any other expenses incurred by the insured are NOT paid by the insurer and the insurer will only pay the “reasonable expenses” to protect the property if the insured maintains an inventory of expenses paid. Until that time, the insured is responsible for all expenses.
Question 25 of 100
What does the “employer’s non-ownership coverage” under a business auto policy cover?
Answer Choices: Select the Correct Answer
Covers the employer when the employee is using their vehicle on company business.
Covers the employee while using their vehicle on company business.
Covers hired employee autos.
Covers all non-owned vehicles.
Question 26 of 100
Your answer: Covers all non-owned vehicles. is incorrect. The correct answer is: Covers the employer when the employee is using their vehicle on company business. .
EXPLANATION:
The purpose of the coverage is to protect the employer and not the employee when the employee uses his or her vehicle on company business and is involved in an at-fault accident that may bring the employer into a claim with the claimant.
Question 26 of 100
A surety which provides a Performance Bond to a contractor might also provide another performance bond which guarantees the materials will be provided at the price quoted and the quality and quantity specified. This bond is referred to as a:
Answer Choices: Select the Correct Answer Completion Bond. Supply Bond Performance Bond. Financial Guarantee Bond.
Question 27 of 100
Your answer: Supply Bond is correct.
EXPLANATION:
This is called a supply bond.
Question 27 of 100
Cameron has his home covered under a Homeowners policy and his limit for bodily injury is $100,000. He also purchased a Personal Umbrella policy with a $1,000,000 limit of liability. Cameron is sued and a judgement was made against him for $500,000. To trigger his Umbrella policy, his Homeowners policy must pay $100,000, but he finds that the insurance company from which he purchased his Homeowners policy has become insolvent. How will the Umbrella insurer pay the claim (disregarding any retention limit)?
Answer Choices: Select the Correct Answer
The Umbrella policy will become primary when the underlying insurer becomes insolvent, and will pay the $100,000, plus the remaining $400,000 due under the Umbrella policy.
The Umbrella policy will pay nothing. The underlying insurance must be kept in place for the Umbrella policy to pay any amount.
The Umbrella policy will not become primary when the underlying insurance when that insurer becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability.
The Umbrella policy will become primary when the underlying insurer becomes insolvent, but will only pay the underlying policies limit of $100,000, and only $300,000 of the remaining judgement, for a total of $400,000.
Question 28 of 100
Your answer: The Umbrella policy will become primary when the underlying insurer becomes insolvent, and will pay the $100,000, plus the remaining $400,000 due under the Umbrella policy. is incorrect. The correct answer is: The Umbrella policy will not become primary when the underlying insurance when that insurer becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability..
EXPLANATION:
The Umbrella policy will not replace the underlying insurance when that insurer becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability.
Question 28 of 100
The purpose of a builder’s risk policy is:
Answer Choices: Select the Correct Answer
To cover a completed and occupied newly constructed building
To cover personal property in a newly constructed building
To cover a building under construction from accidental damage from the perils insured against
To cover only the contractor for direct physical losses in the construction of a building
Question 29 of 100
Your answer: To cover a building under construction from accidental damage from the perils insured against is correct.
EXPLANATION:
The purpose of the builder’s risk policy is to cover a building during the course of construction from accidental damage from the perils insured against.
Question 29 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.
Question 30 of 100
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 30 of 100
Herb has a duplex covered under an HO-8 form in California. The property is damaged by an insured peril that falls under the status of a declared state of emergency. Herb realizes that the standardized HO-8 policy only provides loss settlement at Actual Cash Value (ACV), but he also understands that the California mandatory special provisions form will allow him to make a claim to recoup his cost to repair or replace the damaged property if all of the following are TRUE regarding Herb’s claim, EXCEPT:
Answer Choices: Select the Correct Answer
If he restores the duplex to the same occupancy level and does not increase that level.
He restores the duplex on the same site where it was located at the time of the loss.
He submits his claim for the cost to repair or replace the property within 12 months of the loss.
He submits his claim for the cost to repair or replace the property within 24 months of the loss.
Question 31 of 100
Your answer: He submits his claim for the cost to repair or replace the property within 12 months of the loss. is correct.
EXPLANATION:
The question is asking you to choose the answer that is NOT TRUE. The only answer choice that is not true regarding Herb’s claim is: “He submits his claim for the cost to repair or replace the property within 12 months of the loss.” This answer choice is not true because the California mandatory special provisions form allows Herb 24 months to submit his claim.
Question 31 of 100
Under the medical payments coverage of Ben Green’s personal auto policy, each of the following would qualify as a “family member” EXCEPT:
Answer Choices: Select the Correct Answer
Alice Green, Ben’s sister, who lives in Ben’s household.
Susan Green, Ben’s wife. Susan maintains a separate residence although she and Ben are not divorced.
Ben Green, Jr., Ben’s 16- year-old son, living with his father.
Patty Green, Ben’s 28-year-old daughter. She also lives with her father.
Question 32 of 100
Your answer: Susan Green, Ben’s wife. Susan maintains a separate residence although she and Ben are not divorced. is correct.
EXPLANATION:
The question is asking which person is NOT a family member. Susan Green is no longer a member of the insured’s residence and would not be covered. A spouse is considered to be a family member of the insured IF they live with the insured in the same household.
Question 32 of 100
The insured owns a two family dwelling and is covered under a Homeowner policy. One of the units is rented. The insured also maintains a small incidental business in the structure. In case of a covered loss, which of the following would NOT be paid under Coverage D - Loss of Use?
Answer Choices: Select the Correct Answer
Rental income from the rental unit
Additional living expenses incurred by the insured
Loss of income from the incidental business
Rental income and additional living expenses
Question 33 of 100
Your answer: Loss of income from the incidental business is correct.
EXPLANATION:
Loss of use coverage would not apply to the loss of income from the business. It would cover the loss of rental income and the additional living expenses of the insured.
Question 33 of 100
All of the following are true regarding the “Write Your Own” program of the NFIP, EXCEPT:
Answer Choices: Select the Correct Answer
Insurers are required to participate in the program.
Rates are determined by the NFIP.
The WYO program operates as part of the NFIP and is subject to its rules and regulations.
Insurers participating in the NFIP are responsible for adjusting the claims.
Question 34 of 100
Your answer: Insurers are required to participate in the program. is correct.
EXPLANATION:
Insurers voluntarily participate in the program; they are not required to do so.
Question 34 of 100
The medical payments coverage of a Farm policy can be claimed for up to:
Answer Choices: Select the Correct Answer
1 year.
3 years.
2 years.
5 years by a resident employee injured picking up groceries for the insured.
Question 35 of 100
Your answer: 3 years. is correct.
EXPLANATION:
Medical payment claims can be made up to three years from the date of the injury under the Farm liability coverage.
Question 35 of 100
The insured has a commercial umbrella liability policy with $1 million limit of insurance. Claims were filed against the insured’s umbrella policy three times during one policy period for three different occurrences. The claims are: for $75,000 on February 5; for $800,000 on May 4; and for $500,000 on July 10. Which of these claims will be paid?
Answer Choices: Select the Correct Answer The February 5 claim only The February 5 and May 4 claims only All three claims None of the claims
Question 36 of 100
Your answer: All three claims is correct.
EXPLANATION:
Assuming these claims came from three different occurrences, all three would be paid. Keep in mind that the umbrella policy has two limits. One is the occurrence limit and the other is the aggregate limit that limits the total claim payment amounts during the policy year. The aggregate limit does not apply under most umbrella policies to automobile claims.
Question 36 of 100
A claim is made on an excess liability policy. It is discovered during the claims investigation, that the underlying liability policy and the excess liability policy have different inception and expiration dates. The adjuster finds that the different dates has created a situation where the underlying policy was not in effect at the time of the occurrence, and therefore cannot trigger the excess liability policy to pay the claim. This situation is known as:
Answer Choices: Select the Correct Answer Contribution by Equal Shares. Nonconcurrency. Liability Discrepancy. Split Limits.
Question 37 of 100
Your answer: Nonconcurrency. is correct.
EXPLANATION:
“Nonconcurrency” is a situation where an underlying policy and an excess liability policy, have different inception and expiration dates, creating a situation where the underlying policy is not in force to trigger coverage under the excess liability policy.
Question 37 of 100
A written modification of an insurance policy is known as a(n):
Answer Choices: Select the Correct Answer Modifying form. Supplement form. Additional coverage form. Endorsement form.
Question 38 of 100
Your answer: Supplement form. is incorrect. The correct answer is: Endorsement form. .
EXPLANATION:
An endorsement is used to add, subtract or modify the coverage. Endorsements are added to the policy in writing and take precedent over the original contract wording. COVERED IN INSURANCE FUNDAMENTALS.
Question 38 of 100
When can an adjuster in California use a fictitious name while conducting business?
Answer Choices: Select the Correct Answer
Never
When authorized by the Commissioner to do so
When it does not conflict with another’s name in the same business
Anytime
Question 39 of 100
Your answer: When authorized by the Commissioner to do so is correct.
EXPLANATION:
No licensee may conduct a business under a fictitious or other business name unless and until he or she has obtained the written authorization of the Commissioner to do so.
Question 39 of 100
An insured has her property covered under an “open peril” cause of loss form. She experiences a loss. The burden of proof that the peril that was the actual cause of loss in the claim, lies with:
Answer Choices: Select the Correct Answer
The mediator.
The contractor that will repair the damage.
The insured.
The insurance company.
Question 40 of 100
Your answer: The insured. is incorrect. The correct answer is: The insurance company..
EXPLANATION:
When coverage is provided under an open peril (all-risk) form, the burden of proof lies with the insurance company to prove that the cause of loss is excluded.
Question 40 of 100
