IA Test 8

Question 1

An aleatory contract is most accurately described by which of the following?

It is a contract in which the performance of one party is contingent upon the occurrence of a fortuitous (accidental) event.
It is a contract which alleges certain facts to be true in the written agreement.
It is a contract in which one party offers payment in exchange for the other party’s performance.
It is a contract which alters a previous agreement.

Question 1 of 100

Answer 1

Your answer: It is a contract which alters a previous agreement. is incorrect. The correct answer is: It is a contract in which the performance of one party is contingent upon the occurrence of a fortuitous (accidental) event. .

EXPLANATION:
Examples of aleatory contracts include insurance policies and product warranties. Note: “Contingent” means dependent on the occurrence of something not yet certain (conditional).

Question 1 of 100

Question 2

All of the following are listed on the common Declarations page of a Commercial Package Policy (CPP), EXCEPT:

A list of perils insured against.
The policy period.
The name and mailing address of the insured.
The insured’s premium for each coverage part purchased.

Question 2 of 100

Answer 2

Your answer: The name and mailing address of the insured. is incorrect. The correct answer is: A list of perils insured against. .

EXPLANATION:
A list of perils insured against is not included on the common policy Declarations page of a Commercial Package Policy. The policy period, the premium for each coverage part, and the name and mailing address of the insured ARE listed.

Question 2 of 100

Question 3

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 3 of 100

Answer 3

Your answer: Advertising/personal injury. is correct.

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

Question 3 of 100

Question 4

Under business income coverage, what coverage continues payment of income after the period of restoration is complete?

Maximum period of Indemnification
Extension of coverage
Agreed value
Extended Business Income

Question 4 of 100

Answer 4

Your answer: Maximum period of Indemnification is incorrect. The correct answer is: Extended Business Income.

EXPLANATION:
The coverage is called Extended Business Income and will allow for payment after the period of restoration is complete up to a maximum of 60 days. This is included in the form automatically. Coverage can be extended for a longer period by paying an additional premium.

Question 4 of 100

Question 5

A commercial inland marine condition defining the insurer’s subrogation rights:

Explains the circumstances under which the insurer can cancel the policy.
Imposes a time limit within which the insurer must pay or deny the claim.
Guarantees the insurer’s ability to recover from a third party who is responsible for a covered loss.
Requires the insured to maintain any security system described in the policy application.

Question 5 of 100

Answer 5

Your answer: Guarantees the insurer’s ability to recover from a third party who is responsible for a covered loss. is correct.

EXPLANATION:
When the insurer pays a covered claim caused by a third party, the insurer can seek reimbursement for the loss if they can prove negligence or responsibility on the part of the third party.

Question 5 of 100

Question 6

What is the purpose of the California Fair Access to Insurance Requirements (FAIR) Plan?

To guarantee low cost property insurance to residents of California.
To train agents in the solicitation and selling of property insurance.
To monitor property insurance rates throughout California.
To assure the availability of property insurance to those who are unable to obtain it through the normal insurance market.

Question 6 of 100

Answer 6

Your answer: To guarantee low cost property insurance to residents of California. is incorrect. The correct answer is: To assure the availability of property insurance to those who are unable to obtain it through the normal insurance market..

EXPLANATION:
According to the California Insurance Code (CIC 10090), the purpose of the FAIR Plan is to assure availability of basic property insurance to those who cannot obtain coverage through the normal insurance market.

Question 6 of 100

Question 7

The California Insurance Commissioner, in lieu of suspending or revoking a license issued to an independent adjuster for a violation, may impose which of the following?

Jail sentence for up to six months
$500 monetary penalty
Both a $500 penalty and a jail sentence of up to six months
$1,000 monetary penalty

Question 7 of 100

Answer 7

Your answer: $500 monetary penalty is correct.

EXPLANATION:
The monetary penalty is $500, but no jail time.

Question 7 of 100

Question 8

An adjuster’s report that contains all the facts, evidence and disposition of the claim and is considered to be the final report is known as the:

Full Report.
Field Report.
Interim Report.
Settlement Report.

Question 8 of 100

Answer 8

Your answer: Full Report. is correct.

EXPLANATION:
The “full report” is the third and final report containing all the information gathered.

Question 8 of 100

Question 9

Cars driven by Sue Trent and Jim Higgins were involved in an automobile accident where Mr. Higgins was at fault. Sue Trent’s car was a total loss and valued at $6,000, plus she sustained bodily injuries totaling $25,000. Scott Finley, Ms. Trent’s passenger, was injured and incurred $6,000 in medical expenses. Mr. Higgins, the responsible party, carries bodily injury coverage with limits of $15,000 per person and $30,000 per accident, and property damage coverage of $5,000. His policy will pay a maximum of:

$26,000
$29,000
$35,000
$39,000

Question 9 of 100

Answer 9

Your answer: $26,000 is correct.

EXPLANATION:
Mr. Higgins’ policy will pay a maximum of $26,000. The maximum per person limit that can be paid to any one person as a result of Mr. Higgins’ negligence is $15,000. Therefore, Sue Trent will receive only $15,000 and Scott Finley will receive $6,000. This amounts to $21,000 in bodily injury payments. The property damage limit carried by Mr. Higgins is only $5,000. Therefore, the most that can be paid for the total loss to Sue Trent’s vehicle is $5,000 even though her vehicle is worth $6,000. The total of $21,000 plus the $5,000 is $26,000.

Question 9 of 100

Question 10

Pollutant cleanup under the commercial building and personal property form:

Is completely excluded
Is a coverage extension
Is an additional coverage
Is an optional coverage

Question 10 of 100

Answer 10

Your answer: Is an additional coverage is correct.

EXPLANATION:
The building and personal property coverage form contains several additional coverages (which provide extra limits for added coverage) and a separate set of coverage extensions, which broaden the policy’s existing limits to certain specific situations. Pollutant cleanup is an additional coverage providing an extra $10,000 for the cleanup of pollutants on the insured’s premises when the discharge is a result of a covered loss.

Question 10 of 100

Question 11

The HO-4 provides ____ coverage on the dwelling and ____ peril coverage on personal property.

full / open
limited / basic
no / broad
named peril / open

Question 11 of 100

Answer 11

Your answer: full / open is incorrect. The correct answer is: no / broad.

EXPLANATION:
The HO-4 (Tenants form) insures tenants - people who do not own the building where they reside. It provides no coverage for the dwelling and broad peril coverage on the personal property.

Question 11 of 100

Question 12

Each of the following is true about Difference in Conditions (DIC) insurance, EXCEPT:

Coverage is usually written on an open peril basis.
Traditional perils (such as wind and hail) are usually excluded.
Difference in Conditions insurance can provide Flood insurance.
Difference in Conditions insurance can provide Earthquake coverage.

Question 12 of 100

Answer 12

Your answer: Coverage is usually written on an open peril basis. is correct.

EXPLANATION:
Coverage is usually written on a named peril basis.

Question 12 of 100

Question 13

Which of the following perils is covered by the Broad Form but is not covered by the Basic Form?

Weight of ice and snow
Vandalism
Riot
Sinkhole collapse

Question 13 of 100

Answer 13

Your answer: Sinkhole collapse is incorrect. The correct answer is: Weight of ice and snow.

EXPLANATION:
The Basic Form does not include the peril of the weight of ice and snow.

Question 13 of 100

Question 14

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 14 of 100

Answer 14

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 14 of 100

Question 15

Under the HO-3 Form if an insured and an insurance company cannot agree on the amount of a loss the insurance company may take which of the following actions?

Demand an appraisal of the loss
Refer the dispute to an independent public adjuster
Submit the dispute to a small claims court
Demand an inquiry by the state insurance department

Question 15 of 100

Answer 15

Your answer: Demand an inquiry by the state insurance department is incorrect. The correct answer is: Demand an appraisal of the loss.

EXPLANATION:
This is one of the conditions in the Dwelling and Homeowners policies in case of a dispute between the insured and the insurer as to the value of the loss.

Question 15 of 100

Question 16

The Discovery clause in a commercial crime policy states that losses are covered if they are discovered by the insured:

I. During the policy period.
II. Within 60 days of the termination or cancellation date if no other insurance is obtained.

Both I and II.
I only.
II only.
Neither I nor II.

Question 16 of 100

Answer 16

Your answer: Both I and II. is correct.

EXPLANATION:
Normally, losses must be discovered during the policy period in order to be covered. However, the form provides for an extended period of 60 days beyond the termination or cancellation date to discover losses that were sustained during the policy period.

Question 16 of 100

Question 17

In January 2011 ABC Company wrote a fidelity bond for Jim’s Cleaners. In March, Jim discovered an employee theft that took place two years ago. This claim should be handled by:

The carrier who wrote their bond in 2009
ABC Company
Both carriers
Neither carrier

Question 17 of 100

Answer 17

Your answer: Neither carrier is incorrect. The correct answer is: ABC Company.

EXPLANATION:
Fidelity bonds normally contain a clause known as a superseded suretyship rider, which holds that the current bond is to pay all losses that would have been recoverable under prior bonds if the “discovery period” has expired on the previous bond.

Question 17 of 100

Question 18

The Earthquake Endorsement will provide coverage to the dwelling and/or personal property with the deductible stated as:

$1,000
5% of the limit that applies to all Section I coverages.
$500
$2,500

Question 18 of 100

Answer 18

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 18 of 100

Question 19

A house with a replacement value of $100,000 is covered under a Homeowners policy for $40,000. The policy requires the homeowner to insure the house for 80% of its value. What will the homeowner receive if he incurs a $1,000 loss?

$400.
$500.
$750.
$1,000.

Question 19 of 100

Answer 19

Your answer: $500. is correct.

EXPLANATION:
The home is insured for 50% of the required limit of $80,000 and would, therefore, receive 50% payment for the $1,000 loss.

Question 19 of 100

Question 20

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 20 of 100

Answer 20

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 20 of 100

Question 21

What is the additional limit under the ISO standard BOP for debris removal in case the basic coverage is inadequate?

$25,000
$20,000
$10,000
$15,000

Question 21 of 100

Answer 21

Your answer: $15,000 is incorrect. The correct answer is: $25,000.

EXPLANATION:
The additional limit is $25,000 when the basic coverage provided by the policy is not enough. The basic coverage provides debris removal coverage up to 25% of the actual amount of the loss up to the policy limit. Sometimes the amount of the loss PLUS the debris cleanup will exhaust the limit and the company will pay up to an additional $25,000 for debris removal.

Question 21 of 100

Question 22

Which one of the following situations may be considered “advertising injury”?

A printer’s accidental misprinting of the price of an item in a store’s advertising flyer.
Libel of an organization.
An overcharge by a newspaper for placement of an ad by an individual.
Misspelling of a product’s name.

Question 22 of 100

Answer 22

Your answer: Libel of an organization. is correct.

EXPLANATION:
Only the libel of an organization would be covered under “advertising injury”.

Question 22 of 100

Question 23

Which of the following is the first duty of the insured after suffering a property loss?

Take steps to protect the property from further loss.
Have the damaged property appraised.
Hire an outside claims adjuster.
Increase his coverage.

Question 23 of 100

Answer 23

Your answer: Take steps to protect the property from further loss. is correct.

EXPLANATION:
The insured is required to protect the property from further loss. The insurance company will pay all reasonable costs involved in protecting the property from further loss or damage.

Question 23 of 100

Question 24

Which of the following is not true about the coinsurance clause in commercial property insurance?

If an insured does not insure up to a stated % of value, they will become a coinsurer on a partial loss
It is not relevant on a total loss.
It allows for a variance in the rate depending on the coinsurance percentage.
It allows an insured to collect up to 80% on a covered loss

Question 24 of 100

Answer 24

Your answer: It allows an insured to collect up to 80% on a covered loss is correct.

EXPLANATION:
Coinsurance has a negative effect on partial losses if the policy limit does not meet or exceed the “limit required”. For example, with an 80% coinsurance clause, a limit set at 40% of building’s value is only half of the limit required, and the insured would be a co-insurer on any covered loss. When the limit is at or above the amount required, the insured will collect fully on partial losses, without any penalty. Rates are adjusted downward slightly, when higher coinsurance percentages are chosen. Coinsurance does not affect total losses, since the policy limit would be paid in any case. But coinsurance does NOT state that an insured can collect up to 80% on a covered loss; this is a misunderstanding of the “coinsurance percentage.”

Question 24 of 100

Question 25

In California, which of the following is the definition of an “insurable event”?

California law requires insurance companies to compensate a policyholder for a covered loss, but that holders should be neither penalized nor rewarded by a loss.
An expected or unexpected event, that is covered by an insurance policy, subject to California law.
Any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against him, may be insured against, subject to California law.
Any event caused by a third-party, against an insured, that is covered by insurance and subject to California law.

Question 25 of 100

Answer 25

Your answer: An expected or unexpected event, that is covered by an insurance policy, subject to California law. is incorrect. The correct answer is: Any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against him, may be insured against, subject to California law..

EXPLANATION:
The definition of an “insured event” as detailed by California law is: “Any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against him, may be insured against, subject to California law.”

Question 25 of 100

Question 26

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 26 of 100

Answer 26

Your answer: Documentary is correct.

EXPLANATION:
Documentary evidence is any evidence that is produced in the form of a “document”. Most people think of written documentation, however a photograph or a video can be preserved therefore, they are considered to be documentary evidence.

Question 26 of 100

Question 27

A commercial umbrella policy would, in most cases, provide which of the following coverages?

Excess coverage over an insured auto liability claim
Primary coverage for liability claims
Underlying coverage for liability claims
Primary liability coverage for auto claims

Question 27 of 100

Answer 27

Your answer: Underlying coverage for liability claims is incorrect. The correct answer is: Excess coverage over an insured auto liability claim.

EXPLANATION:
The main purpose of the commercial umbrella policy is to provide excess coverage over the primary or underlying liability coverages. In the rare event that an umbrella policy covered a claim that the underlying policies did not, the umbrella would provide its limits over $0 of primary coverage (and may impose a self-insured retention, sometimes called a deductible, on the insured).

Question 27 of 100

Question 28

The ___ clause covers collision damage to another vessel.

Sistership
Sue and Labor
Inchmaree
Running-Down

Question 28 of 100

Answer 28

Your answer: Sue and Labor is incorrect. The correct answer is: Running-Down .

EXPLANATION:
The running-down clause covers collision damage to another vessel. It does not cover docks or injury to passengers.

Question 28 of 100

Question 29

Hannah must take time away from work to help assist in the investigation of a claim that was made against her BOP policy. The policy will pay for Hannah’s actual loss of earnings up to:

$150 per day
$250 per day
$200 per day
$500 per day

Question 29 of 100

Answer 29

Your answer: $150 per day is incorrect. The correct answer is: $250 per day.

EXPLANATION:
The BOP policy will pay for actual loss of earnings, $250 per day, if the insured is asked by the insurance company to take time away from work to assist in the investigation and/or defense of a claim.

Question 29 of 100

Question 30

Claims expenses under Section II of the Homeowners Policy do not include which of the following?

Investigation Costs
Premiums on bonds required in a suit the company defends.
Relocation Expenses
Reasonable expenses incurred at the company’s request.

Question 30 of 100

Answer 30

Your answer: Premiums on bonds required in a suit the company defends. is incorrect. The correct answer is: Relocation Expenses.

EXPLANATION:
Claims expenses do not include relocating expenses.

Question 30 of 100

Question 31

Requirements that truckers be financially responsible for cargo they carry are imposed by:

The federal government.
State government.
City and county governments.
Both state and federal governments.

Question 31 of 100

Answer 31

Your answer: The federal government. is incorrect. The correct answer is: Both state and federal governments. .

EXPLANATION:
Both the state and federal governments have laws regarding the responsibility of trucking risks that transport cargo.

Question 31 of 100

Question 32

The verdict in a personal injury liability suit was higher than the insured’s underlying liability policy’s limit of insurance. In this situation:

The insured, the insurance company providing the insured’s underlying policy and the company providing the insured’s umbrella policy must agree on an appeal and share the expenses of that appeal.
Neither the insured’s underlying insurer nor the umbrella insurer may appeal without the insured’s agreement.
The insurance company providing the insured’s umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal.
The case cannot be appealed by any of the parties.

Question 32 of 100

Answer 32

Your answer: The insurance company providing the insured’s umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal. is correct.

EXPLANATION:
The umbrella insurer has the option to appeal even though the underlying insurer and the insured chooses not to appeal.

Question 32 of 100

Question 33

Standard Homeowners policies have “special limits of liability” for losses to all of the following types of property, EXCEPT:

Fire damage to guns.
Theft of coins.
Theft of silverware.
Theft of furs.

Question 33 of 100

Answer 33

Your answer: Fire damage to guns. is correct.

EXPLANATION:
The special limit of liability for guns applies only to the peril of theft. Guns are not limited to a certain amount of coverage by the peril of fire.

Question 33 of 100

Question 34

Medical Payments on a CGL will pay for all of the following EXCEPT:

Ambulance services.
Funeral expenses.
In-hospital medical charges.
Pain and suffering.

Question 34 of 100

Answer 34

Your answer: Pain and suffering. is correct.

EXPLANATION:
Medical payments pays for the tangible economic damages incurred as a result of the injury. It does not pay for non-economic intangible damages such as pain and suffering.

Question 34 of 100

Question 35

A claims dispute where a disinterested third party who has decision making authority has been asked to intervene is known as:

Mediation
Resolution
Arbitration
Settlement

Question 35 of 100

Answer 35

Your answer: Arbitration is correct.

EXPLANATION:
Arbitration involves a disinterested third party (the arbitrator) who helps to resolve a disputed claim.

Question 35 of 100

Question 36

Tyler has covered his electronics store with a Commercial Property policy. Tyler has invested in a sophisticated video surveillance system, therefore, he chooses to add a Protective Safeguards Endorsement to his policy to save money on his premiums. Which of the following is now TRUE?

Tyler’s insurer must reimburse him for the cost of the surveillance system, since it reduces the insurer’s risk exposure.
Tyler’s insurer must lower his premiums every year that he goes without filing a theft claim.
Tyler’s insurer may suspend or deny coverage, if he fails to notify the insurer of any known problems with the system.
This endorsement qualifies Tyler for a higher limit for Legal Liability coverage under his Commercial Property policy.

Question 36 of 100

Answer 36

Your answer: Tyler’s insurer may suspend or deny coverage, if he fails to notify the insurer of any known problems with the system. is correct.

EXPLANATION:
The Protective Safeguard endorsement and corresponding premium credit requires that the insured notify the insurer if the system becomes inoperable. Failing to do that could jeopardize coverage.

Question 36 of 100

Question 37

A change in the Qualified Manager of a California independent adjusting business must be reported to the Department of Insurance within ____ days of such change.

30
20
15
10

Question 37 of 100

Answer 37

Your answer: 30 is correct.

EXPLANATION:
The change must be reported within 30 days.

Question 37 of 100

Question 38

Which of the following best describes “no release or walk-away” release?

A form of advanced payment to the claimant.
A structured settlement.
The bills are paid and no attempt to obtain a separate release is made.
The insurer agrees to waive its right to subrogation against a third party who caused the damage.

Question 38 of 100

Answer 38

Your answer: A form of advanced payment to the claimant. is incorrect. The correct answer is: The bills are paid and no attempt to obtain a separate release is made. .

EXPLANATION:
The bills presented are paid with no attempt to obtain a separate release, although the wording on the draft or check may also serve as a form of release. After a certain amount of time has passed with no further contact with the claimant, the file is considered closed.

Question 38 of 100

Question 39

An insured has ONE limit of insurance covering all buildings and contents at three different locations. Coverage written in this manner is referred to as:

Blanket coverage.
Specific coverage.
Scheduled coverage.
Extended coverage.

Question 39 of 100

Answer 39

Your answer: Blanket coverage. is correct.

EXPLANATION:
This approach can be used to cover all buildings and their contents under one single limit of coverage. It can also be used to cover either buildings or contents at different locations. Often times, this helps to avoid underinsurance at a particular location.

Question 39 of 100

Question 40

The insured carries a personal auto policy providing a bodily injury limit of $50,000 each person with a per accident injury limit of $100,000. He injures two occupants in another vehicle. Their injuries total $60,000 for Mr. Jones and $50,000 for Mrs. Jones. The insurance company spent $40,000 in defense and investigation costs. How much will the insured’s policy pay?

$50,000
$100,000
$140,000
$110,000

Question 40 of 100

Answer 40

Your answer: $140,000 is correct.

EXPLANATION:
The per person limit is $50,000. The most that can be paid for this claim is the $100,000 per accident injury limit plus the $40,000 to defend and investigate the claim. The costs to defend and investigate are supplementary coverages and are in addition to the policy limits.

Question 40 of 100

Question 41

In the rating of Workers Compensation coverage, what is the purpose of the experience modification factor?

To determine the base rates charged an employer.
To provide a method of either surcharging the rates or provide a credit in the rates.
To establish payroll classifications based on job description.
To factor in the years the business has been in existence.

Question 41 of 100

Answer 41

Your answer: To establish payroll classifications based on job description. is incorrect. The correct answer is: To provide a method of either surcharging the rates or provide a credit in the rates..

EXPLANATION:
In determining the experience mod, the individual employer is compared with other employers within the classification based upon the frequency of accidents and severity of injuries. The more accidents an employer has had in the past, the higher the modification rating. Therefore, it is an experience modification factor to either surcharge or credit the rates charged for the coverage.

Question 41 of 100

Question 42

Which of the following is correct regarding the differences in coverage between an HO-3 and an HO-5?

HO-3 covers personal property on a named peril basis, while personal property under an HO-5 is covered on an open peril basis.
HO-3 pays market value for dwelling losses while the HO-5 pays replacement cost.
HO-3 only covers personal property owned by the insured, while HO-5 can cover personal property owned or used by the insured.
HO-3 has more exclusions pertaining to the insured dwelling than the HO-5.

Question 42 of 100

Answer 42

Your answer: HO-3 covers personal property on a named peril basis, while personal property under an HO-5 is covered on an open peril basis. is correct.

EXPLANATION:
The HO-3 and the HO-5 are the same in terms of dwelling exclusions, valuation on dwelling losses, and the type of personal property insured. They are different in terms of perils insured against for personal property losses.

Question 42 of 100

Question 43

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 43 of 100

Answer 43

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 43 of 100

Question 44

An insured is covered under a BOP policy. He insures a piece of equipment separately under a floater policy. In case of a loss what coverage will apply under the BOP policy?

The loss is completely covered under the BOP.
The policy will pay its fair percentage of the loss.
The BOP will be excess over the floater policy.
The loss is not covered under the BOP because it is separately insured.

Question 44 of 100

Answer 44

Your answer: The loss is completely covered under the BOP. is incorrect. The correct answer is: The BOP will be excess over the floater policy. .

EXPLANATION:
The BOP would be excess subject to the policy limits if the floater does not cover the entire loss.

Question 44 of 100

Question 45

In cases involving the repair of an auto covered under a policy in California, no insurer may:

Require that an automobile be repaired at a specific repair shop.
Require a claimant to travel an unreasonable distance to inspect a replacement automobile, to conduct an inspection of the vehicle or to obtain a repair estimate.
Suggest or recommend that an automobile be repaired at a specific repair shop.
All of the responses are correct.

Question 45 of 100

Answer 45

Your answer: All of the responses are correct. is correct.

EXPLANATION:
All of the responses are correct.

Question 45 of 100

Question 46

An insured carries a Personal Property Replacement Cost endorsement attached to his Homeowners policy. He has suffered a loss to his personal property. He submits a claim for actual cash value (ACV) at the time of the loss, but notifies the insurer that he intends to make a claim for replacement cost later. The insurer will honor the insured’s request, but only if the cost to repair or replace the property is:

More than $500.
Less than $500.
More than $1,000.
Less than $5,000.

Question 46 of 100

Answer 46

Your answer: More than $500. is correct.

EXPLANATION:
If the cost to repair or replace the property is more than $500, the insurer will pay the actual cash value for the loss, until the actual repair or replacement is made.

Question 46 of 100

Question 47

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 47 of 100

Answer 47

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 47 of 100

Question 48

Which of these product liability lawsuits is NOT covered under the BOP?

A product is made in Canada and the lawsuit is brought in Canada.
A product is made in New York and the lawsuit is brought in the United States.
A product is made in Zaire and the lawsuit is brought in Germany.
A product is made in the United States and the lawsuit is brought in Canada.

Question 48 of 100

Answer 48

Your answer: A product is made in Canada and the lawsuit is brought in Canada. is incorrect. The correct answer is: A product is made in Zaire and the lawsuit is brought in Germany..

EXPLANATION:
Product liability would not apply to products made in Zaire and the lawsuit brought in Germany. The product must be manufactured or sold AND the lawsuit must be brought within the coverage territory, which is the United States, its territories or possessions, Puerto Rico and Canada, for coverage to apply.

Question 48 of 100

Question 49

Part II - Employer’s Liability of a Workers Compensation policy covers the employer for:

Court decisions.
Income benefits.
Rehabilitation.
Death benefits.

Question 49 of 100

Answer 49

Your answer: Income benefits. is incorrect. The correct answer is: Court decisions. .

EXPLANATION:
Part II of a standard Workers Compensation form covers employers for damages and defense costs in the event that the insured negligently causes injury to a covered employee and the injured employee brings a legal action.

Question 49 of 100

Question 50

A licensed independent adjuster has received a written or oral request from the California Department of Insurance concerning a claim. How many days does this adjuster have to respond to the inquiry?

30 days
15 working days
21 calendar days
10 calendar days

Question 50 of 100

Answer 50

Your answer: 10 calendar days is incorrect. The correct answer is: 21 calendar days.

EXPLANATION:
This adjuster must respond immediately, but no later than 21 calendar days from the date of the request.

Question 50 of 100

Question 51

Which of the following bests describes the process of mediation?

A summons to give testimony
Estoppel because of certain acts of others
Both parties present their dispute to a person usually in the legal profession; nothing is binding on either party
All parties submit their differences to a disinterested third party; the result is binding on both parties

Question 51 of 100

Answer 51

Your answer: All parties submit their differences to a disinterested third party; the result is binding on both parties is incorrect. The correct answer is: Both parties present their dispute to a person usually in the legal profession; nothing is binding on either party .

EXPLANATION:
In mediation, both opposing parties present their dispute to an impartial third party, usually a trial lawyer or retired judge, who helps the parties analyze their dispute and devise a compromise. Nothing is binding on either party until an agreement is formulated and agreed to by the opposing parties.

Question 51 of 100

Question 52

The function of the Standard Mortgage clause in a property insurance policy is all of the following, EXCEPT:

Protects the rights (insurable interest) of the mortgagee, even if an insured intentionally causes a loss to the mortgaged property.
Guarantees that the insured will make the mortgage payments on time.
Allows the mortgagee to pay the premium if the insured refuses to do so.
Allows the mortgagee to submit a proof of loss if the insured refuses to do so.

Question 52 of 100

Answer 52

Your answer: Allows the mortgagee to submit a proof of loss if the insured refuses to do so. is incorrect. The correct answer is: Guarantees that the insured will make the mortgage payments on time..

EXPLANATION:
The Standard Mortgage clause, does NOT guarantee that the insured will make the mortgage payments on time, therefore, this is the correct answer.

Question 52 of 100

Question 53

Under the Additional Coverages of the Businessowners Property forms, property removed to protect it from loss will be covered at another location for up to:

5 days.
10 days.
30 days.
20 days.

Question 53 of 100

Submit

Answer 53

Your answer: 30 days. is correct.

EXPLANATION:
The policy specifies open peril coverage for 30 days. This is the standard time period for coverage at another location.

Question 53 of 100

Question 54

Which of the following is excluded under the Ordinance or Law Endorsement form?

The cost to comply with any ordinance or law requiring a higher grade of pipe to be used in a home’s plumbing system.
The cost to comply with any ordinance or law regulating or enforcing the type of insulation that may be used in the attics of homes located in the jurisdiction.
The cost to comply with any ordinance or law requiring that handrails be installed on any porch that is greater than 2 feet in height, and is attached to the covered dwelling.
The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants.

Question 54 of 100

Answer 54

Your answer: The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants. is correct.

EXPLANATION:
The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants is excluded under the Ordinance or Law endorsement.

Question 54 of 100

Question 55

What is the definition of custom farming?

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

Question 55 of 100

Answer 55

Your answer: Farming for others. is correct.

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 55 of 100

Question 56

A furrier customers policy does not cover:

Property in the custody of the insured.
Property owned by the insured’s customers.
Loss in excess of the value of the property as declared by the owner.
The furrier’s liability as a bailee.

Question 56 of 100

Answer 56

Your answer: The furrier’s liability as a bailee. is incorrect. The correct answer is: Loss in excess of the value of the property as declared by the owner..

EXPLANATION:
The furrier is not responsible for a value beyond what is declared by the owner of the property.

Question 56 of 100

Question 57

What is the purpose of reinsurance?

It is insurance for insurance companies, to reduce the risk of catastrophic losses.
It can cover unusual risks which standard carriers are unwilling to insure.
It is special coverage for reinvestment trusts.
It is insurance for past claims that were inadequately covered.

Question 57 of 100

Answer 57

Your answer: It is insurance for past claims that were inadequately covered. is incorrect. The correct answer is: It is insurance for insurance companies, to reduce the risk of catastrophic losses. .

EXPLANATION:
“Reinsurance” is insurance for insurers. Through reinsurance, one insurance company (the ceding insurer) reduces its exposure by transferring (ceding) some or all of its business to another insurer (the assuming insurer). The assuming insurer is also known as the reinsurer.” Reinsurance allows one insurer to write a very large risk and then cede as much of the risk as needed to protect against catastrophic losses.

Question 57 of 100

Question 58

If an employee in California suffers an “at work” injury or illness, they are entitled to ______ % of their lost wages.

66 2/3.
70
75.
65.

Question 58 of 100

Answer 58

Your answer: 66 2/3. is correct.

EXPLANATION:
The employee is entitled to 66 2/3% of their lost wages as a result of a job related injury or illness. Current law limits benefits to a 2 year maximum and increases the maximum to 4 years for certain specified injuries.

Question 58 of 100

Question 59

When an insured suffers a property loss, he or she is obligated by the terms of the policy to do all of the following, EXCEPT:

Separate the damaged from the undamaged property.
Mitigate the loss.
Produce books and records relevant to the claim.
Hire a public adjuster to represent them in the claims process.

Question 59 of 100

Answer 59

Your answer: Hire a public adjuster to represent them in the claims process. is correct.

EXPLANATION:
The insured is not obligated to employ a ‘public adjuster” to assist in the claim against the insurance company. It is an option on the part of the insured.

Question 59 of 100

Question 60

All of the following are covered under the Equipment Breakdown coverage form, EXCEPT:

The breakdown of any structure or materials supporting the equipment.
A structure.
Business personal property.
Personal property of others.

Question 60 of 100

Answer 60

Your answer: A structure. is incorrect. The correct answer is: The breakdown of any structure or materials supporting the equipment..

EXPLANATION:
The policy does not cover the structure or materials supporting the equipment.

Question 60 of 100

Question 61

Which of the following is a significant purpose of a reporting form under the dealer’s physical damage coverage of a Garage policy?

To deal with changing values of autos held for sale.
They increase the amount of time an insured has to report a claim.
To provide guidance to the insured in reporting garage claims.
To guard against theft at auto dealerships.

Question 61 of 100

Answer 61

Your answer: To deal with changing values of autos held for sale. is correct.

EXPLANATION:
Reporting forms require insureds to periodically report values of autos the insured holds for sale, and premiums are charged accordingly. The reporting form takes into account the fluctuating inventory and provides the proper insurance amount to cover the risk at all times during the year.

Question 61 of 100

Question 62

Which of the following statements best describes a “monopolistic” state workers compensation fund?

It is the fund that employers use if they are unable to secure coverage in the private market.
It is a group of small employers who pool their funds and create an insurance company to insure just their own employees.
It is the primary source of workers’ compensation insurance in those states that do not allow private workers compensation insurance to be sold.
It is a federally run fund used to insure the workers compensation exposures of state workers.

Question 62 of 100

Answer 62

Your answer: It is the primary source of workers’ compensation insurance in those states that do not allow private workers compensation insurance to be sold. is correct.

EXPLANATION:
A monopolistic workers compensation fund is the primary source of workers’ compensation insurance in those states that do not allow private workers compensation insurance to be sold.

Question 62 of 100

Question 63

Which of the following is considered robbery?

Taking someone else’s property by use of violence
Taking someone else’s property by use of fear of violence
Taking the property of another by any overt, felonious act committed in the victim’s presence
All of the responses are correct

Question 63 of 100

Answer 63

Your answer: All of the responses are correct is correct.

EXPLANATION:
All of the responses are correct because they fit the definition of a threat of violence or injury in the taking of property.

Question 63 of 100

Question 64

In insurance terms, the phrase severability of insurance means:

Several insured’s are covered by the policy.
The insurance applies separately to each insured.
Each accident will be treated as a separate occurrence.
The insurer may dissolve its relationship with the insured after a loss.

Question 64 of 100

Answer 64

Your answer: Each accident will be treated as a separate occurrence. is incorrect. The correct answer is: The insurance applies separately to each insured..

EXPLANATION:
This means that the insurance applies separately to each insured. However, if more than one insured is involved in the same loss the limits are not increased.

Question 64 of 100

Question 65

The HO-3 form insures for direct physical loss to covered property involving collapse of a building caused by all of the following, EXCEPT:

Hidden decay
Settling
Weight of contents
Use of defective materials

Question 65 of 100

Answer 65

Your answer: Settling is correct.

EXPLANATION:
Settling or earth movement is excluded under the policy.

Question 65 of 100

Question 66

Run, Jump and Hop Fitness Center is being sued for injuries sustained by several customers during a recent birthday party. Run, Jump and Hop has filed for protection under Federal Bankruptcy Laws. The insured notifies the CGL carrier of the claim and their recent bankruptcy filing. The insurer:

Sends a denial letter to all claimants involved in the suit.
Sends a reservation of rights letter to the insured.
Processes the claim as the bankruptcy filing has no bearing on the loss.
Notifies the state where the policy is written of its intent to deny the loss.

Question 66 of 100

Answer 66

Your answer: Sends a reservation of rights letter to the insured. is incorrect. The correct answer is: Processes the claim as the bankruptcy filing has no bearing on the loss..

EXPLANATION:
Bankruptcy of the insured does not relieve the insurer of its duty to defend and handle the claim.

Question 66 of 100

Question 67

A Commercial Auto policy can be used to cover which of the following?

A snow mobile.
A semi-trailer.
Mobile equipment that is not subject to compulsory auto financial responsibility.
An unlicensed three-wheeler.

Question 67 of 100

Answer 67

Your answer: A semi-trailer. is correct.

EXPLANATION:
The semi-trailer is the only one that fits the definition of a “vehicle” under a Commercial Auto policy. Mobile equipment must be added by endorsement. The three-wheeler and the snow mobile should be covered under a Recreational Vehicle policy.

Question 67 of 100

Question 68

Betty Jones claims that the bicycle manufactured last year by Darryl Lanier’s firm was the cause of her daughter’s accident. Which of the following coverages would have provided protection for Mr. Lanier?

Commercial General Liability
Owners and Contractors Protective Liability
Workers Compensation
Contractual Liability

Question 68 of 100

Answer 68

Your answer: Commercial General Liability is correct.

EXPLANATION:
The general liability policy provides products coverage and would respond to cover this claim.

Question 68 of 100

Question 69

Which of the following is excluded on the commercial property special causes of loss form?

Personal property less than 100 feet from the premises
Smoke from industrial operations
Fire damage if the building has been vacant more than 60 days
Fire damage if the building has been unoccupied more than 60 days

Question 69 of 100

Answer 69

Your answer: Fire damage if the building has been vacant more than 60 days is incorrect. The correct answer is: Smoke from industrial operations.

EXPLANATION:
Smoke, vapor, or gas from industrial operations is excluded on the special causes of loss form. Personal property is a subject of the building and personal property coverage form. Fire damage is fully covered when a building is unoccupied. When a building is vacant 60 or more days, fire damage is covered, but settlement will be reduced by 15%.

Question 69 of 100

Question 70

Your answer: Fire damage if the building has been vacant more than 60 days is incorrect. The correct answer is: Smoke from industrial operations.

EXPLANATION:
Smoke, vapor, or gas from industrial operations is excluded on the special causes of loss form. Personal property is a subject of the building and personal property coverage form. Fire damage is fully covered when a building is unoccupied. When a building is vacant 60 or more days, fire damage is covered, but settlement will be reduced by 15%.

Question 69 of 100

Answer 70

Your answer: Negotiation. is correct.

EXPLANATION:
While in the meeting, Kate would have still have been involved in negotiations because the claim has not been resolved yet. The evaluation and investigation of the claim would have been complete by the time Kate called the formal meeting.

Question 70 of 100

Question 71

On the HO-2 policy, damage caused by wind to personal property would be covered if:

Caused by a concurrent causation
Wind blew a hole in the structure allowing the wind to damage the contents
Always
Never

Question 71 of 100

Answer 71

Your answer: Wind blew a hole in the structure allowing the wind to damage the contents is correct.

EXPLANATION:
The HO-2 provides broad form perils coverage on contents. The wind would first have to damage the structure and then the contents. If Mother Nature lets herself in, the loss is covered. If you let Mother Nature in, the damage will be excluded.

Question 71 of 100

Question 72

What are the automatic perils covered under every dwelling policy form?

I. Fire.
II. Lightning.
III. Internal explosion.
IV. Flood.

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

Question 72 of 100

Answer 72

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

EXPLANATION:
Flood is always excluded as a peril under dwelling policies.

Question 72 of 100

Question 73

Owners and contractors protective liability protects against which of the following?

Contingent Liability
Fire
Excess Liability
Theft

Question 73 of 100

Answer 73

Your answer: Excess Liability is incorrect. The correct answer is: Contingent Liability.

EXPLANATION:
Contingent liability is a form of vicarious liability which includes being held legally liable for the acts of others. General contractors are often held liable for the actions of the subcontractors they hire, and require these subcontractors to provide this coverage.

Question 73 of 100

Question 74

Which of the following statements is true regarding a standard personal auto coverage?

Medical Payments Coverage pays the insured and others without regard to fault.
Liability Coverage pays the insured and others without regard to fault.
Liability Coverage pays for damage or injury to others regardless of legal liability.
Medical payments only cover injury to third parties.

Question 74 of 100

Answer 74

Your answer: Medical payments only cover injury to third parties. is incorrect. The correct answer is: Medical Payments Coverage pays the insured and others without regard to fault..

EXPLANATION:
Auto medical payments under the personal auto policy pay for injuries sustained by the insured and others riding in the insured’s car regardless of fault.

Question 74 of 100

Question 75

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 75 of 100

Answer 75

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 75 of 100

Question 76

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 76 of 100

Answer 76

Your answer: Loss resulting from fraudulent use of warehouse receipts 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 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

What type of injury is usually not covered by commercial umbrella liability policies if the insured’s business is advertising, publishing, broadcasting or telecasting?

Slander or libel only
Advertising injury only
Personal injury only
Violation of right of privacy only

Question 78 of 100

Answer 78

Your answer: Slander or libel only is incorrect. The correct answer is: Advertising injury only.

EXPLANATION:
Coverage for advertising injury is not covered if the insured is in the business of advertising, publishing or telecasting.

Question 78 of 100

Question 79

What insurers must participate in accepting business under the California FAIR Plan?

All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies.
Companies who specialize in difficult or hard to place property insurance.
Only those property insurers holding a certificate of authority for 5 years or less in California.
Only those insurers wanting to enter California and have received approval from their board of directors.

Question 79 of 100

Answer 79

Your answer: Companies who specialize in difficult or hard to place property insurance. is incorrect. The correct answer is: All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies..

EXPLANATION:
The purpose of the FAIR Plan is designed to provide a market for those property owners who are unable to obtain insurance through the normal market. Therefore, the California legislature enacted legislation requiring the participation of admitted insurers licensed to write property insurance to participate.

Question 79 of 100

Question 80

Which of the following would be considered “general damages”?

Lost wages
Medical expenses
Pain and suffering
Vocational rehabilitation

Question 80 of 100

Answer 80

Your answer: Lost wages is incorrect. The correct answer is: Pain and suffering.

EXPLANATION:
General damages reimburse an injured party for intangible, non-economic items such as pain and suffering.

Question 80 of 100

Question 81

A NFIP policy has a policy period of:

One or three year term.
Three year term only.
Up to five years.
One year term only.

Question 81 of 100

Answer 81

Your answer: One year term only. is correct.

EXPLANATION:
NFIP policies are written for a one-year term.

Question 81 of 100

Question 82

In California, it is permissible for a automobile insurer to request photographs of a damaged vehicle in lieu of performing a physical inspection. With first party claims, the insurer must request the photographs from the claimant:

Within 7 calendar days after receiving the notice of claim.
Within 6 business days after receiving the notice of claim.
Within 3 business days after receiving the notice of claim.
Within 4 calendar days after receiving the notice of claim.

Question 82 of 100

Answer 82

Your answer: Within 6 business days after receiving the notice of claim. is incorrect. The correct answer is: Within 3 business days after receiving the notice of claim..

EXPLANATION:
The insurer must request the photographs within 3 business days after receiving the claims notice.

Question 82 of 100

Question 83

All the following statements are true regarding earthquake insurance under residential property coverage in California, EXCEPT:

Earthquake insurance must be offered with any new policy, or policy renewal.
The offer of earthquake insurance may be made by mail or electronically.
A separate earthquake policy must be issued; an endorsement is not permitted.
The offer may be made prior to, concurrent with, or within 60 days following the policy effective date.

Question 83 of 100

Answer 83

Your answer: Earthquake insurance must be offered with any new policy, or policy renewal. is incorrect. The correct answer is: A separate earthquake policy must be issued; an endorsement is not permitted..

EXPLANATION:
According to the California Insurance Code (CIC 10081), earthquake coverage may be provided in the policy of residential property insurance itself, either by specific policy provision or endorsement, or in a separate policy or certificate of insurance which specifically provides coverage for loss or damage caused by the peril of earthquake alone or in combination with other perils.

Question 83 of 100

Question 84

The manager of an independent adjusting company in California leaves the business. The Department of Insurance requires notification of the manager’s departure within:

10 days
30 days
60 days
At license renewal

Question 84 of 100

Answer 84

Your answer: 30 days is correct.

EXPLANATION:
The Insurance Department must be advised within 30 days.

Question 84 of 100

Question 85

Which of the following would be considered a consequential loss under a dwelling policy?

Water damage to a house as a result of a fire.
A tree falling on a roof and a branch breaks a window.
Food spoilage in a freezer as a result of a fire in the house.
Smoke damage to a detached garage as a result of a fire.

Question 85 of 100

Answer 85

Your answer: Food spoilage in a freezer as a result of a fire in the house. is correct.

EXPLANATION:
Food spoilage resulting from a covered peril cutting off the electricity would be an example of a consequential loss.

Question 85 of 100

Question 86

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 86 of 100

Answer 86

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

Your answer: A referral is expressly requested by the insured. is correct.

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 86 of 100

Question 87

The fee that must be submitted to the Department with an original adjuster license application in California is:

$62
$56
$47
$72

Question 87 of 100

Answer 87

Your answer: $72 is correct.

EXPLANATION:
The fee that must be submitted to the Department with an original adjuster license application in California is $72.

Question 87 of 100

Question 88

Part I of a standard Workers Compensation policy states that the insurer agrees to defend at its expense any claim, proceeding or law suit against the insured employer:

Regardless of coverage.
Related to any workers’ compensation benefit.
For benefits payable by the insurer.
Related to any employers liability benefits.

Question 88 of 100

Answer 88

Your answer: Related to any workers’ compensation benefit. is incorrect. The correct answer is: For benefits payable by the insurer..

EXPLANATION:
The insurer will defend and incur all expenses associated with that defense for claims, proceedings or law suits against the employed insurer, but only for benefits that the insurer would be obligated to pay under the policy.

Question 88 of 100

Question 89

What is the “retained limit” of a Personal Umbrella policy?

The cost of defending the insured in a lawsuit.
Supplementary Payments coverage.
A deductible that the insured must pay when the Personal Umbrella policy covers a claim that was excluded by the underlying liability policy.
A percentage of policy limits.

Question 89 of 100

Answer 89

Your answer: Supplementary Payments coverage. is incorrect. The correct answer is: A deductible that the insured must pay when the Personal Umbrella policy covers a claim that was excluded by the underlying liability policy..

EXPLANATION:
The retained limit is a deductible that the insured must pay when the Personal Umbrella policy covers a claim that was excluded by the underlying liability policy.

Question 89 of 100

Question 90

Which of the following is true regarding Uninsured Motorist Coverage in California?

The coverage may be waived in writing by an insured.
The insurer does not have to offer the coverage to the insured.
The coverage must be added to all existing auto liability policies.
The coverage protects occupants of an auto which strikes the insured auto.

Question 90 of 100

Answer 90

Your answer: The coverage may be waived in writing by an insured. is correct.

EXPLANATION:
UM coverage must be offered by the insurer but the insured can reject the coverage.

Question 90 of 100

Question 91

The insured is the principal in a construction endeavor in California. As principal, the insured may be held liable for the actions of an independent contractor if:

I. The insured (the principal) fails to exercise due care in the selection of a reasonable competent individual.
II. The work to be performed by the independent contractor is inherently dangerous in nature.
III. Where the negligent act or omission involves a violation of a duty imposed upon the insured (the principal) either by common law or statute.

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

Question 91 of 100

Answer 91

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

EXPLANATION:
I, II, and III are correct as they are all reasons that the principal can be held legally liable for the acts of independent contractors

Question 91 of 100

Question 92

Medical coverage under a personal auto policy will cover the insured if he/she is injured while a passenger on a:

Train.
Bus.
Subway.
Airplane.

Question 92 of 100

Answer 92

Your answer: Bus. is correct.

EXPLANATION:
Personal auto medical coverage is available to the policyholder or a family member (resident relative) injured while occupying, or as a pedestrian, struck by a motor vehicle or trailer designed for use on public roads. It also covers any other persons while they are occupying your motor vehicle. It does not cover injuries sustained while riding in vehicles not intended for use on public roads such as trains, subways and airplanes.

Question 92 of 100

Question 93

Which of the following are are essential if a salvage award is to be made?

I. The property involved must be in peril from some hazard.
II. The salvage service must be voluntary.
III. The effort must be successful.

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

Question 93 of 100

Answer 93

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

EXPLANATION:
All of these are essential if a salvage award is to be made.

Question 93 of 100

Question 94

Which of the following is not a true statement regarding the use of non-original equipment manufactured replacement parts for vehicles?

The parts are at least equal to the original equipment manufacturer parts in terms of kind, quality, safety, fit, and performance.
Insurers specifying the use of non-original equipment manufacture replacement crash parts shall not be required to pay the cost of any modifications to the parts which may become necessary to affect the repair.
Insurers specifying the use of non-original equipment manufacture replacement crash parts warrant that such parts are of like kind, qualify, safety, fit, and performance as original equipment manufacturer replacement crash parts.
Non-original equipment manufacture replacement crash parts must carry non-removable identification so as to identify the manufacturer.

Question 94 of 100

Answer 94

Your answer: Non-original equipment manufacture replacement crash parts must carry non-removable identification so as to identify the manufacturer. is incorrect. The correct answer is: Insurers specifying the use of non-original equipment manufacture replacement crash parts shall not be required to pay the cost of any modifications to the parts which may become necessary to affect the repair..

EXPLANATION:
The insurer must pay for any modifications necessary to properly install the non-original equipment for a proper fit of the equipment in the vehicle. The other three answer choices are all true statements regarding after-market parts.

Question 94 of 100

Question 95

Under Coverage F - Unscheduled Farm Personal Property, the most that will be paid for a “head” of livestock (an adult animal, one year of age or older) is:

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

Question 95 of 100

Answer 95

Your answer: $5,000. is incorrect. The correct answer is: $2,000..

EXPLANATION:
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 a “head” of livestock (adult animal, one year of age or older) will be $2,000.

Question 95 of 100

Question 96

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 96 of 100

Answer 96

Your answer: A blanket employee bond is correct.

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 96 of 100

Question 97

Mr. York had his pickup truck stolen while it was parked in a “no parking” zone outside his office. The value of the truck was $18,500. In addition, tools valued at $200, extra tires and hubcaps for the truck valued at $550 and a tarp worth $50 were in the truck. Mr. York has a collision deductible of $500 and a comprehensive deductible of $250. The insurance company will pay what amount?

$18,000
$18,250
$19,050
$18,800

Question 97 of 100

Answer 97

Your answer: $18,250 is incorrect. The correct answer is: $18,800.

EXPLANATION:
The loss of the truck plus the extra tires and hubcaps would be considered in this claim. These total $19,050 less the deductible of $250 equals $18,800.

Question 97 of 100

Question 98

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 98 of 100

Answer 98

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

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 98 of 100

Question 99

Meg has filed a claim with her insurance company. Conrad, the staff adjuster assigned to her claim, feels there is not coverage under the policy to address Meg’s claim, but he is not sure because he has not investigated the claim. The next step that Conrad will most likely take is to:

Issue a non-waiver agreement to Meg.
Issue a reservation of rights letter to Meg.
Request a declaratory judgment.
Begin the claims investigation.

Question 99 of 100

Answer 99

Your answer: Begin the claims investigation. is incorrect. The correct answer is: Issue a reservation of rights letter to Meg..

EXPLANATION:
A reservation of rights letter would be issued before the claims investigation would begin. This letter would explain to the claimant that the insurance company intends to investigate the claim, but reserves the right to deny the claim if coverage does not apply under the policy.

Question 99 of 100

Question 100

No policy covering residential property can be issued in California unless coverage is offered for:

Earthquakes.
Mudslides.
Hurricanes and hail storms.
Wild fires.

Question 100 of 100

Answer 100

Your answer: Earthquakes. is correct.

EXPLANATION:
No policy of residential property insurance may be issued or delivered or initially renewed in this state by any insurer unless the named insured is offered coverage for loss or damage caused by the peril of earthquake.

Question 100 of 100