IA Test 7

Question 1

Under the “Additional Coverages” of the liability section of HO policies, damage to property of others (whether or not in the insured’s custody and regardless of fault) is covered up to:

$1,500 per occurrence
$5,000 per occurrence
$1,000 per occurrence
$2,500 per occurrence

Question 1 of 100

Answer 1

Your answer: $1,500 per occurrence is incorrect. The correct answer is: $1,000 per occurrence.

EXPLANATION:
The limit is $1,000. This pays regardless of legal liability. The form says, “if caused by the insured.”

Question 1 of 100

Question 2

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?

Within 5 calendar days
Within 10 calendar days
Within 21 calendar days
Immediately

Question 2 of 100

Answer 2

Your answer: Within 10 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 2 of 100

Question 3

Collin suffered a work-related injury on the morning of February 5th and was off work completely until he returned to work on full duty on February 19th. Collin had worked for his employer for four years and was paid $42,125 per year. Collin’s state sets the TTD rate at 66 2/3rd percent of the average weekly wage. The state sets the maximum compensation rate at $420 per week and the waiting period at 3 days retroactive after 10 days. Collin was not paid for working on February 5th. Collin’s average weekly wage is approximately:

$810.
$770.
$534.
$420.

Question 3 of 100

Answer 3

Collin suffered a work-related injury on the morning of February 5th and was off work completely until he returned to work on full duty on February 19th. Collin had worked for his employer for four years and was paid $42,125 per year. Collin’s state sets the TTD rate at 66 2/3rd percent of the average weekly wage. The state sets the maximum compensation rate at $420 per week and the waiting period at 3 days retroactive after 10 days. Collin was not paid for working on February 5th. Collin’s average weekly wage is approximately:

Your answer: $420. is incorrect. The correct answer is: $810..

EXPLANATION:
Collins average weekly wage is approximately $810. We arrive at this number by dividing Collin’s annual salary of $42,125 by 52 weeks.

Question 3 of 100

Question 4

An insured leases his building to a tenant. The tenant subsequently suffers a loss when the insured’s building burns. What should the tenant do?

Submit the claim to the insured’s (landlord’s) insurance company
The tenant must prove liability on the part of the insured landlord
Tenant must submit a claim to his/her own carrier
None of the responses are correct

Question 4 of 100

Answer 4

Your answer: Tenant must submit a claim to his/her own carrier is correct.

EXPLANATION:
The commercial property building and personal property form includes under “your business property”, coverage for the tenants improvements and betterments to the landlords property. This coverage applies if the tenant purchases business personal property coverage. However, proper limits of coverage must be in place.

Question 4 of 100

Question 5

What is generally excluded on the Condominium commercial unit-owners form?

The improvements and betterments of the unit owner
Hostile Fire damage
Building coverage
Inside appliances and fixtures

Question 5 of 100

Answer 5

Your answer: Building coverage is correct.

EXPLANATION:
Coverage for the building is generally excluded for the unit-owners form as that should be covered on the Condominium association form.

Question 5 of 100

Question 6

In California an independent adjuster must post a surety bond. The bond is made payable to:

The people of the State of California.
The Insurance Commissioner.
The California Underinsurance Fund.
The insurer that employs the adjuster.

Question 6 of 100

Answer 6

Your answer: The people of the State of California. is correct.

EXPLANATION:
The bond is made payable to the people of the State of California.

Question 6 of 100

Question 7

The retroactive date indicated on the Declarations page of a claims-made commercial umbrella liability policy provides that coverage for injury or damage will be:

Excluded after that date.
Included before that date under every circumstance.
Excluded before that date.
Included before that date if a supplemental extended reporting period has been purchased.

Question 7 of 100

Answer 7

Your answer: Included before that date under every circumstance. is incorrect. The correct answer is: Excluded before that date. .

EXPLANATION:
The retroactive date is the date that claims-made coverage begins. Claims before that date are excluded by the policy.

Question 7 of 100

Question 8

In the CGL, which of the following would be included under the definition of a personal injury?

A tenant evicted by his landlord sues the landlord for invasion of privacy and wrongful eviction
A customer injured in a department store when a sign falls on her and sues the store for medical costs and pain and suffering
An employee injured lifting a heavy carton sues his employer for costs
An individual fired from her job sues her employer for unemployment benefits

Question 8 of 100

Answer 8

Your answer: An employee injured lifting a heavy carton sues his employer for costs is incorrect. The correct answer is: A tenant evicted by his landlord sues the landlord for invasion of privacy and wrongful eviction.

EXPLANATION:
Invasion of privacy and wrongful evictions are part of the personal injury coverage.

Question 8 of 100

Question 9

Kate is a claims representative who has been involved in adjusting a very complex claim. During a meeting with the claimant and the claimant’s attorney, Kate asks the claimant to sign an authorization for access to his medical records. Which of the following is the term used to describe this stage of the claims process?

Evaluation.
Resolution.
Investigation.
Negotiation.

Question 9 of 100

Answer 9

Your answer: Investigation. is correct.

EXPLANATION:
If Kate is requesting authorization to review information, the term best used to describe this stage is “investigation”.

Question 9 of 100

Question 10

In California, an insurer may not recommend a specific body shop to make repairs on the auto involved in a claim, unless:

The body shop has non-manufacture parts on hand to do the job.
It is the only body shop available in the immediate area.
A referral is expressly requested by the insured.
Never.

Question 10 of 100

Answer 10

Your answer: Never. is incorrect. The correct answer is: A referral is expressly requested by the insured..

EXPLANATION:
California regulations state that the insured has his or her choice of repair facilities. The insured may ask for a recommendation, but still makes the final decision.

Question 10 of 100

Question 11

Ocean marine coverage for losses to the insured vessel caused by bursting boilers, latent defects in the vessel and negligence of the master or crew members are addressed by which of the following?

The Inchmaree clause.
Protection and indemnity coverage.
Hull coverage
Barratry

Question 11 of 100

Answer 11

Your answer: Protection and indemnity coverage. is incorrect. The correct answer is: The Inchmaree clause. .

EXPLANATION:
Inchmaree was a steam ship that suffered a machinery loss that was not covered. A lawsuit followed, and future policies offered this coverage under what is commonly referred to as the Inchmaree clause.

Question 11 of 100

Question 12

Personal Liability Coverage of the Homeowners program covers the insured for all of the following, EXCEPT:

Business activities.
Personal activities anywhere in the United States.
Personal activities outside of the United States.
Personal activities of the insured’s young children.

Question 12 of 100

Answer 12

Your answer: Business activities. is correct.

EXPLANATION:
Personal Liability Coverage E provides liability protection for insureds anywhere in the world for their non-business activities. Of course coverage would be subject to the policy exclusions.

Question 12 of 100

Question 13

The low-cost policy limits for automobile insurance for low-income drivers who are insured by the California Automobile Assigned Risk Plan are:

$20,000/$40,000/$10,000
$25,000/$50,000/$25,000
$10,000/$20,000/$3,000
$12,500/$25,000/$10,000

Question 13 of 100

Answer 13

Your answer: $10,000/$20,000/$3,000 is correct.

EXPLANATION:
The policy must offer coverage in the amount of $10,000 for bodily injury to, or death of, each person as a result of any one accident and, subject to that limit as to one person, the amount of $20,000 for bodily injury to, or death of all persons as a result of any one accident,and the amount of $3,000 for damage to property of others as a result of any one accident.

Question 13 of 100

Question 14

An umbrella policy without any special endorsements would NOT cover:

Bodily Injury
Personal Injury
Uninsured Motorists
Property Damage

Question 14 of 100

Answer 14

Your answer: Uninsured Motorists is correct.

EXPLANATION:
Uninsured motorists must be added by endorsement in order for the umbrella policy to cover this exposure.

Question 14 of 100

Question 15

In the event of a loss under a personal auto policy, an insured is required to submit to the insurance company all of the following information, EXCEPT:

An appraisal of the damaged property.
A list of any known witnesses.
A notice of claim.
Proof of loss statement if requested.

Question 15 of 100

Answer 15

In the event of a loss under a personal auto policy, an insured is required to submit to the insurance company all of the following information, EXCEPT:

Your answer: A list of any known witnesses. is incorrect. The correct answer is: An appraisal of the damaged property. .

EXPLANATION:
Obtaining an appraisal of damaged property is not a required duty of the insured. Verification of the damage is the duty of the auto appraiser.

Question 15 of 100

Question 16

A commercial building worth $400,000 is insured under a Commercial Property policy for $240,000, and an 80% coinsurance clause applies. A $20,000 loss to the building has occurred. How much will the insured receive when a claim is filed?

$14,000
$10,000
$12,000
$15,000

Question 16 of 100

Answer 16

Your answer: $12,000 is incorrect. The correct answer is: $15,000.

EXPLANATION:
The insured should have carried $320,000 to be in compliance with the 80% coinsurance clause, therefore the building is 25% underinsured, penalizing the insured. $240,000 (the amount carried) divided by $320,000 (the amount required) multiplied by $20,000 loss, equals $15,000.

Question 16 of 100

Question 17

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?

$500,000
$0
$100,000
$1,000,000

Question 17 of 100

Answer 17

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 17 of 100

Question 18

All of the following are EXCLUDED under the Earthquake Endorsement to a Homeowners policy, EXCEPT:

Flood and tidal wave.
Land shock waves.
Waves and tsunami.
The cost of filling land.

Question 18 of 100

Answer 18

Your answer: The cost of filling land. is incorrect. The correct answer is: Land shock waves..

EXPLANATION:
All of the items listed are excluded under the Earthquake Endorsement to a Homeowners policy, EXCEPT: Land shock waves, they are covered.

Question 18 of 100

Question 19

All of the following items may be covered by a Commercial Inland Marine policy, EXCEPT:

Transport vehicles.
Radio towers.
Bridges.
Property being transported.

Question 19 of 100

Answer 19

Your answer: Transport vehicles. is correct.

EXPLANATION:
“Instrumentalities of Transportation or Communication” are acceptable items to be covered under a Commercial Inland Marine policy and this would include a “transport vehicle”. The property being transported is also eligible for coverage. The vehicle transporting the items is covered under a Business Auto policy, not Commercial Inland Marine.

Question 19 of 100

Question 20

Before an application for an independent adjuster license is granted, the applicant must meet all of the following requirements, EXCEPT:

The applicant must be at least 21 years of age.
The applicant must have at least two years of experience in insurance claims adjusting.
The applicant must not have committed acts constituting grounds for denial of a license.
Payment of the application fee.

Question 20 of 100

Answer 20

Your answer: The applicant must be at least 21 years of age. is correct.

EXPLANATION:
The applicant must be at least 18 years of age.

Question 20 of 100

Question 21

The clause in an ocean marine policy that refers to “particular average” means:

Only one party shares in the loss.
Damage to cargo losses will be shared by all parties.
Payment must be made under the freight insurance coverage.
Payment must be made under the ‘running down clause’.

Question 21 of 100

Answer 21

Your answer: Damage to cargo losses will be shared by all parties. is incorrect. The correct answer is: Only one party shares in the loss..

EXPLANATION:
The particular average clause means only one party shares in the loss.

Question 21 of 100

Question 22

The Homeowners “Additional Residence Rented to Others” endorsement will provide coverage for an additional structure, used as a residence, that is rented by the insured as a:

A one-family dwelling.
A two-family dwelling.
A one to four-family dwelling.
A one to two-family dwelling.

Question 22 of 100

Answer 22

Your answer: A one to four-family dwelling. is correct.

EXPLANATION:
The Homeowners “Additional Residence Rented to Others” endorsement provides coverage for an additional structure, used as a residence, for one to four families.

Question 22 of 100

Question 23

The Dwelling Form Flood policy will cover:

I. A single-family residence.
II. A three-family residence.
III. Manufactured housing.

II and III only.
I and III only.
I only.
I, II, and III.

Question 23 of 100

Answer 23

Your answer: I, II, and III. is correct.

EXPLANATION:
The Dwelling Form Flood policy will cover residential structures up to four families or manufactured housing.

Question 23 of 100

Question 24

Which of the following losses would be covered under commercial auto physical damage coverage?

Fire
Loss to equipment used for radar or laser detection
Losses resulting from wear and tear
Loss caused by war or military action

Question 24 of 100

Answer 24

Your answer: Fire is correct.

EXPLANATION:
Fire is covered and the other choices are excluded.

Question 24 of 100

Question 25

QUESTION:
All of the following are true regarding the limit of insurance shown on the Declarations page of a Commercial Auto policy, EXCEPT:

The limit of coverage applies to each vehicle listed on the Declarations page.
The number of vehicles involved in the accident does not affect the limit of coverage per accident.
The number of claims per accident does not change the limit of coverage for the accident.
The Commercial Auto policy contains an aggregate limit for all claims paid during the policy year. Once that limit is paid for all accidents, the insured would be uninsured for future claims during the remainder of the year.

Question 25 of 100

Answer 25

Your answer: The Commercial Auto policy contains an aggregate limit for all claims paid during the policy year. Once that limit is paid for all accidents, the insured would be uninsured for future claims during the remainder of the year. is correct.

EXPLANATION:
The Commercial Auto policy does not contain an aggregate limit for all accidents that occur during the policy period. Assume that a policy has a per accident limit of $100,000 and there are five separate accidents during the policy year in which the limit per accident was paid. The insurer would pay out $500,000.

Question 25 of 100

Question 26

The Ordinance or Law Endorsement can be added to a Homeowners form to increase the amount of coverage in ______ increments, up to ______ coverage.

20% increments, up to 80% coverage.
25% increments, up to 100% coverage.
30% increments, up to 70% coverage.
15% increments, up to 95% coverage.

Question 26 of 100

Answer 26

Your answer: 25% increments, up to 100% coverage. is correct.

EXPLANATION:
Coverage for Ordinance or Law is already included on all Homeowners forms except the HO-8. The Ordinance or Law Endorsement can be attached to the form, increasing the coverage in 25% increments, up to 100% coverage.

Question 26 of 100

Question 27

Sue Green has a commercial crime policy on her restaurant, but she only chose the insuring agreement “Inside the Premises - Robbery or Safe Burglary of Other Property”. If an employee steals some equipment by breaking into the premises during the daytime on a holiday, the policy would:

Not cover the loss, since acts by employees are excluded.
Cover the loss.
Not cover the loss, since daytime burglaries are excluded.
Not cover the loss, since only loss of merchandise is covered.

Question 27 of 100

Answer 27

Your answer: Cover the loss. is incorrect. The correct answer is: Not cover the loss, since acts by employees are excluded. .

EXPLANATION:
Sue would need to add the insuring agreement “Employee Theft” to her crime policy to cover the dishonest acts of her employees. Even though this fits the definition of burglary due to a forced entry, theft by an employee is not covered on the form. Sue would need employee theft coverage.

Question 27 of 100

Question 28

Of the following businesses, which one is NOT eligible for a Businessowners Policy?

An auto dealership
A barbershop
A beauty salon
A pizza parlor

Question 28 of 100

Answer 28

Your answer: An auto dealership is correct.

EXPLANATION:
Auto dealerships are not eligible for the BOP. The Garage policy would cover these risks and includes special coverages for the automobiles on a dealership lot for sale, and customers’ cars left for repair or service. The barbershop, beauty salon, and pizza parlor would qualify for the BOP.

Question 28 of 100

Question 29

An independent adjuster must complete ___ hours of continuing education during each license renewal cycle.

12
20
24
36

Question 29 of 100

Answer 29

Your answer: 20 is incorrect. The correct answer is: 24.

EXPLANATION:
An individual who holds an insurance adjuster license and who is not exempt must satisfactorily complete a minimum of 24 hours, of which three hours are to be in ethics, of continuing education courses pertinent to the duties and responsibilities of an insurance adjuster license reported to the Insurance Commissioner on a biennial basis in conjunction with his or her license renewal cycle.

Question 29 of 100

Question 30

Which of the following policy forms would BEST protect a business that must keep operating at any cost after a loss?

Extra Expense
Business Income
Gross Earnings
Contingent Business Interruption

Question 30 of 100

Answer 30

Your answer: Contingent Business Interruption is incorrect. The correct answer is: Extra Expense.

EXPLANATION:
Certain types of risks cannot be shut down because of a loss. Banks, hospitals, dairies are some examples. Extra Expense coverage is needed.

Question 30 of 100

Question 31

Collision is referred to as colliding with another object or _____of the vehicle.

Loss
Upset or rollover
Impact
Destruction

Question 31 of 100

Answer 31

our answer: Impact is incorrect. The correct answer is: Upset or rollover.

EXPLANATION:
Other terms for collision include “upset” and “rollover.”

Question 31 of 100

Question 32

As a prerequisite to receive an adjuster license in California, the applicant must have at least two years of claims adjusting experience. The California Insurance Code defines one year of experience as:

Not less than 1,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.
Not less than 1,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.

Question 32 of 100

Answer 32

Your answer: Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. is correct.

EXPLANATION:
The CIC defines “one year of experience” as not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. Therefore, if an applicant must have the equivalent of two years of experience, they would need a total of 4,000 hours of compensated work.

Question 32 of 100

Question 33

Which of the following would qualify for a homeowner policy?

A seasonal dwelling (not the prime residence premises)
A rental dwelling
The insured’s primary dwelling
All are eligible properties

Question 33 of 100

Answer 33

Your answer: All are eligible properties is incorrect. The correct answer is: The insured’s primary dwelling.

EXPLANATION:
The homeowner policy is designed for owner occupied property and also the primary residence. Once coverage is in place on the residence premises, many companies will cover a seasonal dwelling if it meets their underwriting standards. A dwelling under construction by the insured can be covered but not for someone else to occupy. A rental dwelling would be covered under a dwelling policy and not a homeowner policy.

Question 33 of 100

Question 34

In lieu of suspending or revoking a license, the Commissioner may impose of civil penalty of:

$500.
$2,500.
$1,000.
$5,000.

Question 34 of 100

Answer 34

Your answer: $500. is correct.

EXPLANATION:
The Commissioner, in lieu of suspending or revoking a license, may impose a civil penalty not to exceed $500 upon a licensee.

Question 34 of 100

Question 35

A non-waiver is issued by which party?

The claimant
The insurer
The court
The commissioner

Question 35 of 100

Answer 35

Your answer: The commissioner is incorrect. The correct answer is: The insurer.

EXPLANATION:
A non-waiver is issued by an insurer when there are coverage issues which need further investigation, and the insurer wishes to maintain its rights to deny or limit coverage in the future.

Question 35 of 100

Question 36

Dwelling forms include a liberalization clause. It says that any revision of coverage which broadens the insurance without an additional premium charge will be automatically applied to existing policies, if the revision is adopted during the policy period or within:

60 days prior to the effective date.
30 prior to the effective date.
45 prior to the effective date.
90 days prior to the effective date.

Question 36 of 100

Answer 36

Your answer: 45 prior to the effective date. is incorrect. The correct answer is: 60 days prior to the effective date. .

EXPLANATION:
This provision is slightly broader on personal lines than on commercial coverages. On most commercial policies, the time period is 45 days. Except where a state exception applies, 60 days is correct for dwelling forms.

Question 36 of 100

Question 37

Your insurance company pays for the damages to your auto and for your bodily injury after your car is struck by a hit and run driver. The accident is witnessed by several individuals who can describe the car and its driver but who failed to get a license number. A year after the accident, the owner of the hit and run vehicle turns himself in. It is determined that he was fully insured at the time of the accident but fled because he had been drinking. Pursuant to the California Insurance Regulations, your insurance company can:

Do nothing as a full year has passed since the accident occurred
Subrogate against the other insurance company to recover only for the damages to your vehicle
Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury
File a lawsuit to waive the statute of limitations then proceed with subrogation

Question 37 of 100

Answer 37

Your answer: Subrogate against the other insurance company to recover only for the damages to your vehicle is incorrect. The correct answer is: Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury.

Question 38

Which of the following would not be “other structures” in the HO forms?

A separate building on the insured premises used for business.
A building connected to the main dwelling only by a fence.
A private garage rented to a non-tenant.
An in-ground swimming pool.

Question 38 of 100

Answer 38

Your answer: An in-ground swimming pool. is incorrect. The correct answer is: A separate building on the insured premises used for business. .

EXPLANATION:
A building used for business purposes is not covered as an “other structure”. However, there is an exception for buildings that are rented out as private garages. Buildings connected to the dwelling only by a fence are considered detached, and therefore are “other structures”. An in-ground swimming pool would also be considered a structure.

Question 38 of 100

Question 39

The newer CGL form now includes as insured’s which of the following?

Volunteer Employees
People not employed by the insured who help to load and unload trucks by hand
Employees of Sub-contractors
Owners of boats rented by the insured for business use

Question 39 of 100

Answer 39

Your answer: Volunteer Employees is correct.

EXPLANATION:
The new form now includes volunteer workers as insureds while acting in that capacity.

Question 39 of 100

Question 40

John has commercial property coverage written on a value reporting form. The maximum limit of coverage for inventory values is $150,000. The insured has reported an inventory value of $75,000 when the actual value was $100,000. A $20,000 loss occurs. The insurer will pay:

$15,000.
$10,000.
$20,000.
$13,333.

Question 40 of 100

Answer 40

Your answer: $15,000. is correct.

EXPLANATION:
The insured is required to carry a 100% coinsurance clause when the reporting form method is used. The insured is also required to report 100% of the actual inventory values. This insured reported less than the actual inventory by 25% and will only receive 75% of a partial loss or $15,000.

Question 40 of 100

Question 41

Which of the following would NOT be excluded under the Liquor Liability Exclusion of the CGL?

Murray’s Beer Emporium having a wine tasting party.
John’s Bar serves alcohol to an underage customer.
Mary’s Antique Shop is having a customer appreciation social and serves alcohol at no charge to her guests.
The Winking Lizard Restaurant serves alcohol to an intoxicated patron.

Question 41 of 100

Answer 41

Your answer: Mary’s Antique Shop is having a customer appreciation social and serves alcohol at no charge to her guests. is correct.

EXPLANATION:
Since Mary is not charging for the alcohol and is not in the business of selling, serving or manufacturing liquor, the exclusion for Liquor Liability would not apply in this situation.

Question 41 of 100

Question 42

An inland marine coverage which covers the insured’s merchandise held for sale, such property that is sold but not delivered, customers property in the care and custody of the insured, and property being transported to or from the insured, is a:

Dealers form
Commercial articles floater.
Floor plan merchandise coverage form.
Bailee’s customers policy.

Question 42 of 100

Answer 42

Your answer: Commercial articles floater. is incorrect. The correct answer is: Dealers form.

EXPLANATION:
An equipment dealers form is an example.

Question 42 of 100

Question 43

All of the following are violations of “good faith duty” by the adjuster, EXCEPT:

Paying a settlement within 30 days after an agreement is reduced to writing.
Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without notice to, or knowledge or consent of, the insured.
Failing to pay the amount of any claim due any person insured by the contract within 60 days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause.
Misrepresenting pertinent facts or insurance policy provisions relating to any coverages at issue.

Question 43 of 100

Answer 43

Your answer: Paying a settlement within 30 days after an agreement is reduced to writing. is correct.

EXPLANATION:
Paying a claim within 30 days after an agreement is reduced to writing is not a violation but a requirement. The other responses are violations of “good faith duty.”

Question 43 of 100

Question 44

The Commercial Building and Personal Property form suspends coverage for losses caused by vandalism or theft if, at the time of loss, the building has been vacant for more than:

60 consecutive days.
90 consecutive days.
30 consecutive days.
20 consecutive days.

Question 44 of 100

Answer 44

Your answer: 90 consecutive days. is incorrect. The correct answer is: 60 consecutive days. .

EXPLANATION:
Vacancy means the building is unoccupied and does not contain contents. After 60 days of vacancy certain perils and coverages are affected.

Question 44 of 100

Question 45

Six months after a new employee is hired, the insured learns that the employee was fired from a previous job for stealing company property. How will this discovery affect the insured’s crime coverage?

Coverage for this employee will be cancelled at the end of the policy period
It will have no effect on coverage because the dishonest act occurred before the employee was hired
Coverage for this employee will be cancelled after 30 days
Coverage for this employee will be cancelled immediately

Question 45 of 100

Answer 45

Your answer: It will have no effect on coverage because the dishonest act occurred before the employee was hired is incorrect. The correct answer is: Coverage for this employee will be cancelled immediately.

EXPLANATION:
Coverage for this employee will be cancelled immediately. This happens immediately due to the discovery of the past dishonest acts by that employee. Another example, an employee was caught in May 2011 falsifying documents. The policy in question becomes effective August 2011. In November, the same employee is caught stealing. Since the insured knew of the employee’s dishonest act prior to the policy period, any loss is excluded from coverage.

Question 45 of 100

Question 46

Which of the following would not be addressed by a court in the determination of a declaratory judgment?

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 46 of 100

Answer 46

Your answer: Determine if other insurance policies 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 46 of 100

Question 47

Proceeds from a commercial property insurance policy can be assigned by:

No one because assignment is forbidden by the policy
The policyholder
The mortgagee
The loss payee

Question 47 of 100

Answer 47

Your answer: No one because assignment is forbidden by the policy is incorrect. The correct answer is: The policyholder.

EXPLANATION:
This is not an “assignment of the policy” but simply a directive as to benefit disbursements.

Question 47 of 100

Question 48

An insured has purchased a Businessowners Policy. He insures both the real and personal property. Assuming no endorsements apply, will property losses be adjusted on an actual cash value basis or on a replacement cost basis?

Replacement Cost Basis
Actual Cash Value Basis
Market Value
Functional Replacement Cost Basis

Question 48 of 100

Answer 48

Your answer: Actual Cash Value Basis is incorrect. The correct answer is: Replacement Cost Basis.

EXPLANATION:
Unless endorsed to the contrary the BOP adjusts property losses on a replacement cost basis.

Question 48 of 100

Question 49

Jeremy’s home is valued at $950,000. How much insurance does he need to carry on his home, in order to be fully insured under a typical Homeowners insurance policy?

$855,000
$874,000
$950,000
$760,000

Question 49 of 100

Answer 49

Your answer: $874,000 is incorrect. The correct answer is: $760,000.

EXPLANATION:
The coinsurance provision requires Jim to cover his home for at least 80% of the cost to replace it. 80% of $950,000 is $760,000.

Question 49 of 100

Question 50

Which one of the following situations would be considered an example of strict liability?

Wayne keeps a large police-trained dog in his jewelry store as a deterrent to burglars. During the time the store is open for business, the dog is confined to a back room. One day, the dog escaped, ran into the showroom and bit a customer.
The roof of a grocery store blew off during a tornado. Pieces of the roof struck the side of the store next door, damaged the siding and broke several windows.
Carl thinks of himself as a master handyman but is careless with his tools. A trespasser tripped on a hammer and was injured.
Alice deliberately hit Fred over the head with her heavy leather handbag after he remarked that she was overweight.

Question 50 of 100

Answer 50

Your answer: Alice deliberately hit Fred over the head with her heavy leather handbag after he remarked that she was overweight. is incorrect. The correct answer is: Wayne keeps a large police-trained dog in his jewelry store as a deterrent to burglars. During the time the store is open for business, the dog is confined to a back room. One day, the dog escaped, ran into the showroom and bit a customer..

EXPLANATION:
In strict liability there is little if any defense. In most jurisdictions where strict liability is imposed, the defendant is held responsible whether or not he or she is negligent. Wayne had a duty to keep the dog restrained when open for business.

Question 50 of 100

Question 51

The commercial inland marine coverage form known as valuable papers and records includes coverage for:

I. Money and securities.
II. Deeds, drawings and maps.
III. Books, files and mortgages.

II and III only
I and II only
I and III only
I only

Question 51 of 100

Answer 51

Your answer: I and II only is incorrect. The correct answer is: II and III only.

EXPLANATION:
Money and securities are covered under a crime insurance form and not covered in the valuable papers and records form.

Question 51 of 100

Question 52

Workers compensation benefits provided in California include:

I. Medical benefits, including first aid
II. Disability income benefits providing payments for lost wages
III. Rehabilitation benefits, including physical rehabilitation expenses or vocational training
IV. Death benefits payable to the dependent spouse and children

I, II, III and IV
II, III and IV only
I, II and III only
I, II and IV only

Question 52 of 100

Answer 52

Your answer: I, II, III and IV is correct.

EXPLANATION:
All responses are examples of benefits provided by workers compensation.

Question 52 of 100

Question 53

The National Flood Insurance Program will pay which of the following amounts to assist with moving of property to safety when there is imminent flood danger?

$500
$1,000
$1,500
$2,000

Question 53 of 100

Answer 53

Your answer: $2,000 is incorrect. The correct answer is: $1,000.

EXPLANATION:
The NFIP provides $1,000 of coverage to move property to safety, but that amount decreases the coverage limit payable for damaged property.

Question 53 of 100

Question 54

In a liability situation, more than one policy will share equally in the loss until the lowest policy limit is exhausted and continue in that fashion until all policy limits are exhausted. This is known as:

Pro-rata liability.
Primary and excess liability.
Contribution by equal shares.
Other insurance clause.

Question 54 of 100

Answer 54

Your answer: Contribution by equal shares. is correct.

EXPLANATION:
If more than one policy is involved in a liability situation, “contribution by equal shares” will require each policy to share in the loss up to the lowest limit of insurance which at that point, that lowest limit policy is exhausted and excused. The remaining companies continue to share the loss equally until each policy is exhausted.

Question 54 of 100

Question 55

Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as which of the following types of insurance?

Title insurance.
Surety insurance.
Credit insurance.
Mortgage Guaranty insurance.

Question 55 of 100

Answer 55

Your answer: Title insurance. is correct.

EXPLANATION:
Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as Title insurance.

Question 55 of 100

Question 56

The agent or insurer must obtain the applicant’s signature acknowledging receipt of the California Residential Property Insurance disclosure form within ____ of the date of the application.

10 days
20 days
60 days
90 days

Question 56 of 100

Answer 56

Your answer: 20 days is incorrect. The correct answer is: 60 days.

EXPLANATION:
No policy of residential property insurance may be issued in this state by any insurer unless the named insured is provided a copy of the California Residential Property Insurance disclosure statement. The agent or insurer must obtain the applicant’s signature acknowledging receipt of the disclosure form within 60 days of the date of the application.

Question 56 of 100

Question 57

The insured awoke and found that a water line on his side of the water meter has broken. Several thousand gallons of water have escaped. The water company bills the insured for the loss of the water since the breakage occurred on their side of the meter. Their insurance company will:

Not pay for the loss of water.
Pay for the loss of the water.
Apply a deductible to the loss of the water.
Subrogate against the plumber that installed the water line.

Question 57 of 100

Answer 57

Your answer: Pay for the loss of the water. is incorrect. The correct answer is: Not pay for the loss of water..

EXPLANATION:
Water is specifically excluded as personal property under the insured’s Homeowner policy.

Question 57 of 100

Question 58

What does an insurer do when the insured has possibly waived his or her rights in a liability claim?

Send a “reservation of rights” letter.
Deny the claim.
Pay only a portion of the proven liability claim.
Insist the insured obtain his or her own legal counsel.

Question 58 of 100

Answer 58

Your answer: Send a “reservation of rights” letter. is correct.

EXPLANATION:
There are situations where the insured has waived the right to coverage under a liability policy. Failure to report a claim in a timely fashion could cause the insured to waive coverage. The insurer will normally issue a reservation of rights letter to the insured advising that it will investigate the claim but will not commit to pay the claim.

Question 58 of 100

Question 59

An insured who had a $500,000 primary liability policy purchased a $1 million Umbrella liability policy with a $2,000 self-insured retention limit. Later, the insured allowed the required underlying primary policy with a limit of $100,000 to expire. A week after that, the insured became liable for a $100,000 loss that is not excluded by the provisions of either the primary policy or the Umbrella policy. How will this loss likely be settled?

The insured will pay the full $100,000 loss.
The umbrella policy will pay the full $100,000 loss.
The underlying policy will pay the full $100,000 loss.
The insured will pay $2,000, and the umbrella policy will pay the remainder of the loss.

Question 59 of 100

Answer 59

Your answer: The insured will pay $2,000, and the umbrella policy will pay the remainder of the loss. is incorrect. The correct answer is: The insured will pay the full $100,000 loss..

EXPLANATION:
Because the insured allowed the required underlying policy to expire, he is responsible for the $100,000 loss. The Umbrella policy does not recognize a reduction in the underlying limits nor the non-renewal of underlying coverage.

Question 59 of 100

Question 60

Sarah is shopping at a grocery store and wants to purchase a bottle of juice. The aisle is marked off with a rope awaiting the clerk to clean up a previously broken bottle and spill on the floor. Sarah moves the rope to get the item and slips and falls on the floor, cutting her face on the scattered glass. Which of the following would be the defense that the insurance company would most likely use in this situation?

Breach of duty on the part of the customer.
Assumption of risk and contributory negligence on the part of the customer.
Trespassing on non-entry areas by the customer.
Comparative negligence.

Question 60 of 100

Answer 60

Your answer: Assumption of risk and contributory negligence on the part of the customer. is correct.

EXPLANATION:
Business owners are only liable for negligence if a failure to carry out their duty caused the accident. For strict liability cases against manufacturers or sellers of defective products, the injury must result from a defect. In this case the grocery store attempted to keep the premises safe and was not negligent and no breach of duty occurred. The customer assumed the risk which contributed to the injuries.

Question 60 of 100

Question 61

The insured’s diamond ring valued at $10,000 has been destroyed in a fire. She is insured by a HO-3 policy. What is the responsibility of the insurance company with respect to this loss?

Pay the ACV of the ring
Deny the claim because of the jewelry limitation
Pay the loss and waive the deductible
Pay only the replacement value of the ring and waive any deductible

Question 61 of 100

Answer 61

Your answer: Pay the ACV of the ring is correct.

EXPLANATION:
The policy contains a limitation for the theft of the jewelry. Since the ring was destroyed in the fire the insurer is responsible for the actual cash value of the ring unless the insured purchased replacement cost coverage.

Question 61 of 100

Question 62

Which of the following would be paid under the Business Income form of a standardized Commercial Property policy?

Coverage for repairing the physical damage to the property.
Coverage for continuing operating expenses while damaged property is being repaired.
Coverage for planned upgrades to damaged property.
Coverage for the cost of goods sold while the damaged property is being repaired.

Question 62 of 100

Answer 62

Your answer: Coverage for repairing the physical damage to the property. is incorrect. The correct answer is: Coverage for continuing operating expenses while damaged property is being repaired..

EXPLANATION:
The Business Income form will pay for loss of business income and extra expenses incurred to keep operating after a loss.

Question 62 of 100

Question 63

QUESTION:
Which of the following is a type of “voluntary loss” taken to save the property from further loss?

General Average Loss
Partial Average Loss
Actual Total Loss
Constructive Total Loss

Question 63 of 100

Answer 63

Your answer: Partial Average Loss is incorrect. The correct answer is: General Average Loss.

EXPLANATION:
A “General Average Loss” is a partial loss that is “voluntary”. This type of loss is taken to save the property from further loss, such as an insured who uses a garden hose to extinguish a fire that has started on her couch. The water damage is “voluntary” but it prevented further loss to the house.

Question 63 of 100

Question 64

All of the following would be excluded under Coverage D - Physical Damage of a Personal Automobile Policy, EXCEPT:

Permanently-installed GPS systems.
Radar or laser detection equipment.
Camper bodies or trailers owned by the named insured but not listed on the declarations page.
Custom furnishings or equipment in a van.

Question 64 of 100

Answer 64

Your answer: Custom furnishings or equipment in a van. is incorrect. The correct answer is: Permanently-installed GPS systems..

EXPLANATION:
Permanently installed electronic equipment such as sound systems and GPS devices are covered, but no custom equipment is covered in a van unless an endorsement for this coverage is attached to the policy and an additional premium is paid. (Remember, radar detectors are excluded.)

Question 64 of 100

Question 65

Under the farm forms, a “half a head” of livestock is an animal that is:

Under three years of age and the most coverage that will be paid for that animal under the policy is $3,000.
Under two yeara of age and the most coverage that will be paid for that animal under the policy is $2,500.
Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000.
Is under six months of age and the most coverage that will be paid for that animal under the policy is $500.

Question 65 of 100

Answer 65

Your answer: Is under six months of age and the most coverage that will be paid for that animal under the policy is $500. is incorrect. The correct answer is: Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000..

EXPLANATION:
An animal under one year of age, is known as a “half a head.” Coverage F covers farm personal property on a blanket basis both on and off the insured premises. A blanket limit for livestock can be added, however, the most that will be paid for “half a head” of livestock (an animal under one year of age) is $1,000.

Question 65 of 100

Question 66

Dan has coverage under an HO-3. He borrows Mike’s scuba diving equipment for a trip to Puerto Rico. While in Puerto Rico, Mike’s scuba diving equipment is stolen. Mike’s property is:

Excluded by the care, custody and control rule.
Covered anywhere in the world at the insured’s request.
More appropriately turned in under Mike’s HO policy.
Covered for up to $500.

Question 66 of 100

Answer 66

Your answer: Covered for up to $500. is incorrect. The correct answer is: Covered anywhere in the world at the insured’s request. .

EXPLANATION:
Coverage C – Personal Property includes property owned or used by the insured anywhere in the world. The scuba diving equipment was being used by the insured and it would be covered under Dan’s HO-3 policy.

Question 66 of 100

Question 67

What is the definition of custom farming?

Farming for others.
Sharecropping.
Raising specialty crops.
Crops grown using genetically modified seeds.

Question 67 of 100

Answer 67

Your answer: Crops grown using genetically modified seeds. is incorrect. The correct answer is: Farming for others..

EXPLANATION:
Custom farming is farming for others for a fee under a contract or agreement. A special endorsement is required if the receipts are in excess of $5,000 per year.

Question 67 of 100

Question 68

When completing an application for an independent claims adjuster license in California, one year of experience consists of not less than _____ hours of actual compensated work performed by the applicant.

1,000
500
2,000
750

Question 68 of 100

Answer 68

Your answer: 2,000 is correct.

EXPLANATION:
One year of experience consists of not less than 2,000 hours of actual compensated work performed by each applicant preceding the filing of the application. Applicants must substantiate claimed years and hours of qualifying experience and the exact details as to the character and nature by written certifications from employers, subject to independent verification by the Commissioner.

Question 68 of 100

Question 69

Which section of the Commercial Package Policy varies based on the lines of coverage included?

Coverage Part.
Common Policy Conditions.
Common Policy Declarations.
None of the responses listed are correct.

Question 69 of 100

Answer 69

Your answer: Common Policy Declarations. is incorrect. The correct answer is: Coverage Part. .

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.

Question 69 of 100

Question 70

All of the following items would be covered under a Personal Property Replacement Cost Endorsement attached to a Homeowners policy, EXCEPT:

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 70 of 100

Answer 70

Your answer: Carpeting that was damaged inside the covered dwelling. is incorrect. The correct answer is: Jewelry that is described in the policy and subject to an agreed value loss settlement. .

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 70 of 100

Question 71

Insurers conducting business in California must establish an operate a “Special Investigative Unit” to investigate suspected insurance fraud. Employees of the SIU must:

I. Have the ability to conduct effective investigations of suspected insurance fraud.
II. Be familiar with insurance and related laws.
III. Have knowledge or experience in general claims practices.
IV. Have knowledge of current trends in insurance fraud.

I, II and III only
I, III and IV only
I, II, III and IV
I and IV only

Question 71 of 100

Answer 71

Your answer: I, II, III and IV is correct.

EXPLANATION:
A Special Investigative Unit must be composed of employees who have knowledge and/or experience in general claims practices, the analysis of claims for patterns of fraud, and current trends in insurance fraud, education and training in specific red flags, red flag events, and other criteria indicating possible fraud. They must have the ability to conduct effective investigations of suspected insurance fraud and be familiar with insurance and related law and the use of available insurer related database resources.

Question 71 of 100

Question 72

What type of employee dishonesty bond should a company purchase when they have a large turnover of employees in various positions?

An individual position bond
A blanket employee bond
A named schedule bond
A fiduciary bond

Question 72 of 100

Answer 72

Your answer: A fiduciary bond is incorrect. The correct answer is: A blanket employee bond.

EXPLANATION:
A blanket employee bond does not list the names or positions of employees. All employees are covered. It is the best type of employee dishonesty bond to use for large employers. This solves the problem of having to list the names of employees when a large turnover of employees is standard.

Question 72 of 100

Question 73

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

I and II only.
I, II, III and IV.
I and IV only.
III and IV only.

Question 73 of 100

Answer 73

Your answer: I, II, III and IV. is incorrect. The correct answer is: I and II only..

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 73 of 100

Question 74

For an agreement to be considered a contract, it must contain all of the following, EXCEPT:

The contract must be carefully considered by both parties.
One party must accept an offer that is made by the other party.
Both parties must be legally competent at the time of making the agreement.
The parties must exchange money, services, work, products, or other valuable consideration.

Question 74 of 100

Answer 74

Your answer: The parties must exchange money, services, work, products, or other valuable consideration. is incorrect. The correct answer is: The contract must be carefully considered by both parties. .

EXPLANATION:
Contracting parties should carefully consider the agreement, but there is no legal requirement to do so. The other choices represent required elements of a contract.

Question 74 of 100

Question 75

Which company would be called the “third party” under XYZ Corporation’s Commercial General Liability policy?

XYZ Corporation (the insured).
Trustworthy Insurance (the insurer).
Jones Flooring Specialist (a claimant).
The Board of Directors of XYZ Corporation (the insured).

Question 75 of 100

Answer 75

Your answer: The Board of Directors of XYZ Corporation (the insured). is incorrect. The correct answer is: Jones Flooring Specialist (a claimant). .

EXPLANATION:
Claimants under a CGL policy are called the “third party”. The insured is the “first party” and the insurer is the “second party”.

Question 75 of 100

Question 76

What is the business income limit of liability under a Businessowners policy?

$100,000
Actual loss sustained for up to six months.
Actual loss sustained for up to 12 months.
The actual loss of income from the date of the damage to the end of the policy period.

Question 76 of 100

Answer 76

Your answer: The actual loss of income from the date of the damage to the end of the policy period. is incorrect. The correct answer is: Actual loss sustained for up to 12 months..

EXPLANATION:
There is no specific amount listed in the policy as the business income limit of liability. Coverage applies for the actual loss sustained for up to 12 months, even if the policy was set to expire in the meantime.

Question 76 of 100

Question 77

If an adjusting firm intends to add a new branch office, what action must be taken?

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 77 of 100

Answer 77

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 77 of 100

Question 78

Employee dishonesty coverage does NOT include:

Money stolen by the employee on the way to the bank
Inventory shortage caused by the employee
Embezzlement of money by an employee
Robbery of an employee

Question 78 of 100

Answer 78

Your answer: Inventory shortage caused by the employee is incorrect. The correct answer is: Robbery of an employee .

EXPLANATION:
Employee dishonesty coverage provides coverage for loss caused by the dishonest acts of an employee. For robbery of an employee the insured would need to be covered for robbery because this does not require dishonesty on the part of the employee.

Question 78 of 100

Question 79

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?

60 days
30 days
20 days
45 days

Question 79 of 100

Answer 79

Your answer: 20 days is incorrect. The correct answer is: 60 days.

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 79 of 100

Question 80

A BOP policy liability limits are $500,000 per occurrence and $1,000,000 aggregate. The losses for the policy term are $100,000, $750,000 and $400,000. What is the correct amount the insurance company pays for all three losses?

$500,000
$750,000
$1,000,000
$1,250,000

Question 80 of 100

Answer 80

Your answer: $1,000,000 is correct.

EXPLANATION:
The aggregate limit is the most the policy can pay per policy period. In this case a maximum of $1,000,000. The $100,000 can be paid; $500,000 of the $750,000 claim can be paid since that is the most that is available in any one occurrence. The $400,000 claim can be paid. After paying these three claims, the 1,000,000 aggregate limits have been reached and no future claims will be paid.

Question 80 of 100

Question 81

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?

Criminal
Real
Demonstrative
Documentary

Question 81 of 100

Answer 81

Your answer: Real is incorrect. The correct answer is: Documentary.

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 81 of 100

Question 82

Tamika has her dwelling covered under an HO-8 form in California. She suffers damage to her dwelling by a covered peril. The limit of liability of her HO-8 policy is $60,000. Tamika hires a contractor to make the repairs to her dwelling using common or functionally equivalent materials. The cost of the materials used to repair the dwelling amount to $75,000. Three months following the loss, Tamika submits a claim to recoup the amount she spent to repair her dwelling. How much will her insurance company pay on this claim?

Actual Cash Value (ACV)
$15,000
$75,000
$60,000

Question 82 of 100

Answer 82

Your answer: $60,000 is correct.

EXPLANATION:
The standard HO-8 forms pays only ACV, however the California mandatory special provisions form requires the insurance company to pay the lesser of the limit of liability, or the necessary amount actually spent to repair or replace using common or functionally equivalent materials. Because the limit of liability under Tamika’s HO-8 policy is $60,000, this is the total amount that the insurance company will pay.

Question 82 of 100

Question 83

Which of the following incidents of property damage would be covered by BAP liability coverage?

Damage to a computer that was in a covered auto at the time of a collision. The computer was being returned by the named insured, who rented it.
Damage to the named insured’s building when a covered auto ran into it.
Damage to a neighbor’s auto parked on the street. A covered auto hit the parked auto.
Damage to a radar detector caused by theft.

Question 83 of 100

Answer 83

Your answer: Damage to a computer that was in a covered auto at the time of a collision. The computer was being returned by the named insured, who rented it. is incorrect. The correct answer is: Damage to a neighbor’s auto parked on the street. A covered auto hit the parked auto..

EXPLANATION:
Only the damage to the neighbor’s parked car would be covered. The other items are specifically excluded.

Question 83 of 100

Question 84

A sandblaster becomes very sick after working for his current employer for 6 months. The employer did not know that the employee was suffering from a respiratory disease caused by similar work done over the past 20 years. How much responsibility, if any, would the current employer have for workers compensation?

None, since this is a pre-existing condition
A portion of the responsibility, to be shared will all employers within the past year.
Maximum 50% responsibility
Full responsibility

Question 84 of 100

Answer 84

Your answer: Full responsibility is incorrect. The correct answer is: A portion of the responsibility, to be shared will all employers within the past year..

EXPLANATION:
Responsibility for workers compensation benefits for occupational diseases is apportioned to all of a worker’s employers during the last year which exposed the worker to the hazards associated with the occupational disease. Employers beyond one year in the past are absolved of responsibility to pay workers compensation benefits.

Question 84 of 100

Question 85

Under an Equipment Breakdown Protection policy with $500,000 in coverage, a covered “accident” resulted in the following:

I. $500,000 worth of damage to the property.
II. $10,000 damage to the property of another in the insured’s care.
III. $5,000 in legal fees to defend the insured in this case.

The policy will pay a total of:

$505,000.
$500,000.
$510,000.
$515,000.

Question 85 of 100

Answer 85

Your answer: $515,000. is incorrect. The correct answer is: $505,000..

EXPLANATION:
The maximum that can be paid is $500,000 because that is the limit of the policy. Legal expenses are in addition to the limit of coverage, adding $5,000 to the amount the insurer will pay, making the correct answer $505,000.

Question 85 of 100

Question 86

An insured has suffered a property loss and reported the claim promptly. Which of the following is NOT an immediate duty of the adjuster who received the claim?

Immediately seek subrogation rights against a third party.
Verify the effective date of the coverage.
Verify the proximate cause of loss.
Determine those that have insurable interests in the property.

Question 86 of 100

Answer 86

Your answer: Immediately seek subrogation rights against a third party. is correct.

EXPLANATION:
Subrogation of a claim occurs after the claim has been paid. Afterwards, the adjuster may seek subrogation against a third party who may have caused the loss.

Question 86 of 100

Question 87

Your homeowners policy provides jewelry coverage for a set limit. If you insure a piece of jewelry separately, on a floater, and the jewelry is stolen can you claim it under both the HO coverage and the floater?

Yes, as you have paid a separate premium for the floater.
Yes, because it is “named jewelry” on the floater.
Yes, because the floater merely serves to add all-risk coverage.
No, because you cannot collect twice for the item’s value.

Question 87 of 100

Answer 87

Your answer: Yes, because the floater merely serves to add all-risk coverage. is incorrect. The correct answer is: No, because you cannot collect twice for the item’s value..

EXPLANATION:
Once coverage is specifically written separately, no coverage would apply under the homeowner policy for jewelry.

Question 87 of 100

Question 88

For a first-party uninsured motorist claim in California, how many days notification must an insurer give if the statute of limitations on filing a claim is about to expire?

60 days
30 days
No notice is required.
45 days

Question 88 of 100

Answer 88

Your answer: 30 days is correct.

EXPLANATION:
For pending claims, the insurer must provide written notice to any first-party uninsured motorists claimant at least 30 days before the expiration date of the statute of limitations.

Question 88 of 100

Question 89

A farmer has unintentionally libeled a neighboring farmer by stating that the neighbor’s dairy products are inferior to his. This is an example of:

Advertising/personal injury.
Bodily injury.
Contractual liability.
Vicarious liability.

Question 89 of 100

Answer 89

Your answer: Advertising/personal injury. is correct.

EXPLANATION:
This is an example of personal/advertising injury. No bodily injury or property damage occurred.

Question 89 of 100

Question 90

Which of the following would NOT be covered under employee dishonesty?

Dishonest acts of partners
Loss resulting from fraudulent use of warehouse receipts
Loss resulting from trading in the insured’s genuine name
None of these losses are covered

Question 90 of 100

Answer 90

Your answer: Dishonest acts of partners is incorrect. The correct answer is: None of these losses are covered.

EXPLANATION:
There are several exclusions applying to employee theft in crime insurance policies, including dishonest acts of the owners, partners, or members, and losses resulting from trading or from fraudulent or dishonest use of warehouse receipts.

Question 90 of 100

Question 91

How soon must a change in the qualified manager of an adjusting firm be reported to the California Department of Insurance?

Within one year
Within 30 days
Immediately
Does not have to be reported

Question 91 of 100

Answer 91

Your answer: Within 30 days is correct.

EXPLANATION:
A change in the qualified manager, branch manager, officer or partner must be reported to the DOI within 30 days of the change.

Question 91 of 100

Question 92

All of the following are exclusions from the standard workers compensation policy, EXCEPT:

Any bodily injury or aggravation of that injury that is unintentionally caused by the insured.
Liability assumed under a contract.
Bodily injury to an illegal worker knowingly hired by the insured.
Bodily injury that occurs outside the coverage territory.

Question 92 of 100

Answer 92

Your answer: Liability assumed under a contract. is incorrect. The correct answer is: Any bodily injury or aggravation of that injury that is unintentionally caused by the insured..

EXPLANATION:
Bodily injury caused UNINTENTIONALLY by the insured is the only claim that would be covered, therefore it is not an exclusion.

Question 92 of 100

Question 93

Which of the following are also insureds in connection with conducting the insured’s business under a commercial umbrella policy?

Employees in connection with bodily injury to third parties
Employees in connection with bodily injury to another employee
Employees participating in a recreational athletic event not sponsored by the employer
None of the responses are correct

Question 93 of 100

Answer 93

Your answer: Employees in connection with bodily injury to another employee is incorrect. The correct answer is: Employees in connection with bodily injury to third parties .

EXPLANATION:
Employees are covered for third party legal actions as a result of a work related accident caused by the employee.

Question 93 of 100

Question 94

A chemical company accidentally released toxic fumes into the air. The fumes reached two other businesses which eventually had to be evacuated for two business days while the air cleared. The evacuation caused loss of income to the businesses due to their inability to open their doors for business. This situation is an example of:

The insured’s work.
Completed operations.
Property damage.
An intentional tort.

Question 94 of 100

Answer 94

Your answer: An intentional tort. is incorrect. The correct answer is: Property damage..

EXPLANATION:
This is an example of a property damage loss which includes damages incurred due to loss of use of the property. The two businesses affected cannot open their doors and use their property. For this type of claim to be covered under a CGL policy, the insured would need to have added the “Pollution Liability” endorsement to the policy.

Question 94 of 100

Question 95

When writing a Business Auto policy, insurers may be reluctant to use Symbol 1, because this provides coverage for “any auto”, creating a situation where a company underwriter may feel the exposure is too great. What symbol will the underwriter most likely recommend for use in place of Symbol 1 as a method to reduce the insurance company’s exposure?

Symbol 2.
Symbol 7.
Symbol 8.
Symbol 4.

Question 95 of 100

Answer 95

Your answer: Symbol 8. is incorrect. The correct answer is: Symbol 7..

EXPLANATION:
The underwriter will recommend that Symbol 7 (which only covers vehicles specifically listed on the Declarations page) be used to reduce the exposure for the insurance company.

Question 95 of 100

Question 96

Which of the following most accurately describes an indirect loss?

After a loss, an insured homeowner incurs a hotel bill while the house is being repaired.
While putting out the fire the fireman’s water hoses damaged some of the door frames.
An electrical short in a basement appliance causes a fire which destroys the kitchen.
High winds cause a dead tree to fall across a power line which cuts off power to the refrigerator, leading to spoilage of the food inside.

Question 96 of 100

Answer 96

Your answer: High winds cause a dead tree to fall across a power line which cuts off power to the refrigerator, leading to spoilage of the food inside. is incorrect. The correct answer is: After a loss, an insured homeowner incurs a hotel bill while the house is being repaired..

EXPLANATION:
Indirect losses are the result of direct, physical losses as with the hotel bill after a loss. The other answer choices describe consequential situations, but still direct losses.

Question 96 of 100

Question 97

A building is insured by three insurance companies to spread coverage on a particular type of hazardous risk. In case of a loss under a Commercial Property policy, the payment of the claim would invoke the pro-rata liability clause which means:

Each insurer pays its limits under the policy.
Neither insurer pays.
Each insurer pays in accordance to the percentage its coverage bears to the total amount of insurance in force.
A claim will be paid according to the coinsurance clause.

Question 97 of 100

Answer 97

Your answer: Each insurer pays in accordance to the percentage its coverage bears to the total amount of insurance in force. is correct.

EXPLANATION:
With the pro-rata approach, each insurer will pay a percentage of the claim as its limit bears to the total amount of coverage in force. For example: If an insurer is covering 20% of a property risk it will only pay 20% of a loss. Assume that the total amount of insurance is $300,000 and the risk is split evenly by each insurer writing a third of the total coverage. Each would pay up to their limit of 33% of the loss.

Question 97 of 100

Question 98

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?

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 98 of 100

Answer 98

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 98 of 100

Question 99

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?

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 99 of 100

Answer 99

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 99 of 100

Question 100

In a work-related injury, the loss of a finger would be characterized as what type of disability?

Permanent total
Permanent partial
Temporary total
Temporary partial

Question 100 of 100

Answer 100

Your answer: Permanent total is incorrect. The correct answer is: Permanent partial.

EXPLANATION:
Loss of a finger or limb is defined as a permanent partial injury, and this characterization is used for the establishment of disability benefits to the injured employee.

Question 100 of 100