IA Test 9

Question 1

The insured has suffered a covered loss under his DP-3 form. He fails to protect the property from further loss. The additional loss that occurs as a result of this failure may be denied due to which of the following exclusions?

Intentional loss
Removal clause
Neglect
Fraud

Question 1 of 100

Answer 1

Your answer: Neglect is correct.

EXPLANATION:
The policy contains a “neglect” exclusion. When the insured fails to protect the property from further loss, the insurer may invoke this exclusion.

Question 1 of 100

Question 2

How are household personal property claims settled under the farm policy?

Replacement cost
Market value
Replacement cost if insured 80% to value
Actual cash value

Question 2 of 100

Answer 2

Your answer: Actual cash value is correct.

EXPLANATION:
Claims under farm policies for household personal property will be settled on an actual cash value basis similar to the homeowner policy. An endorsement for replacement cost settlement is available for additional premium.

Question 2 of 100

Question 3

Tea is applying for a new adjuster license in California. What is the fee she will need to submit with her license application?

$47
$56
$72
$29

Question 3 of 100

Answer 3

Your answer: $72 is correct.

EXPLANATION:
The application fee for an original license is: $72. (CIC 14097)

Question 3 of 100

Question 4

Which of the following businesses would not be affected by the liquor liability exclusion?

A European wine distributor.
Triple-A Liquor Store.
An insurance company offering wine at an open-house for agents.
A grocery store that sells wine.

Question 4 of 100

Answer 4

Your answer: An insurance company offering wine at an open-house for agents. is correct.

EXPLANATION:
The policy only provides “host liquor liability” coverage and is not intended to cover any business involved in the manufacturing, sale, or distribution of alcohol.

Question 4 of 100

Question 5

Which of the following statements is true regarding controlled forms?

These forms are very flexible and can be manuscripted to meet the needs of individual insured’s.
These forms are always issued by state insurance departments.
Conditions and rates for these forms are determined solely on the basis of underwriting judgment.
These forms are usually issued according to published rules and rates.

Question 5 of 100

Answer 5

Your answer: These forms are usually issued according to published rules and rates. is correct.

EXPLANATION:
Controlled forms and their rates are filed for approval with the state insurance departments. They are usually issued according to published rules and rates. A jewelers block policy is an example.

Question 5 of 100

Question 6

All of the following are “advertisements” as defined by the California Code of Regulations (CCR), EXCEPT:

Any written or printed communication for the purpose of soliciting, describing, or promoting the licensed business of the licensee, including a brochure, letter, pamphlet, newspaper, periodical, publication, or other writing.
A directory listing caused or permitted by the licensee that also indicates his licensed activity.
Any printing or writing on buildings used as the licensee’s place of business or branch office.
A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee.

Question 6 of 100

Answer 6

Your answer: A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee. is incorrect. The correct answer is: Any printing or writing on buildings used as the licensee’s place of business or branch office..

EXPLANATION:
“Any printing or writing on buildings used as the licensee’s place of business or branch office” is actually listed as NOT being included in the definition of “advertisement”. All the other answer choices ARE considered “advertisements” according to the CCR. (CCR 2691.17)

Question 6 of 100

Question 7

Which of the following amounts would be paid on a covered auto suffering a total loss? The retail value is $1,250 and the average trade in value is $1,000.

$1,000 plus applicable taxes
$1,500 plus applicable taxes
$1,250 plus applicable taxes
$2,995 plus applicable taxes

Question 7 of 100

Answer 7

Your answer: $1,250 plus applicable taxes is correct.

EXPLANATION:
In case of a total loss to a covered vehicle the insurer is required to pay the retail value of the vehicle plus any applicable sales taxes.

Question 7 of 100

Question 8

A common carrier has signed a contract to deliver goods of the seller. The goods are to be shipped “Free on Board Destination”. When does the responsibility of the seller end?

When they are picked up by the carrier.
When the goods to be shipped are placed on the loading dock of the seller.
Not until the goods are delivered to the buyer in accordance with the contract terms.
When the buyer confirms the purchase of transportation coverage.

Question 8 of 100

Answer 8

Your answer: Not until the goods are delivered to the buyer in accordance with the contract terms. is correct.

EXPLANATION:
The title to the property in transit remains with the shipper until it arrives at the buyer’s destination point and has been accepted by the buyer. These clauses in the cargo policy will determine where the responsibility lies for damage to cargo in transit. These clauses are usually contained in the Bill of Lading which is the contract between the shipper (seller) and the buyer (purchaser) of the goods or the contract to transport the goods with the carrier.

Question 8 of 100

Question 9

Which of the following would not be improvements or betterments?

Carpet
Furniture
Interior walls
Electrical wiring

Question 9 of 100

Answer 9

Your answer: Interior walls is incorrect. The correct answer is: Furniture .

EXPLANATION:
Improvements and betterments are items added to a tenant’s rented structure that are permanent in nature. The tenant has insurable interest in them during occupancy of the building, and therefore can insure them. Furniture is not an improvement or betterment; it is personal property.

Question 9 of 100

Question 10

David has damaged his vehicle by striking a tree. He can:

I. Take the car to a repair garage recommended by the insurer.
II. Take the car to a garage of his choice.
III. Accept payment based on the adjuster’s estimate.
I, II and III
I and II only
I and III only
I only

Question 10 of 100

Answer 10

our answer: I, II and III is correct.

EXPLANATION:
The choice belongs to the David, the insured.

Question 10 of 100

Question 11

What is a Reporting Form policy?

The form that must be filled out to report a loss of personal property to the insurer
A policy that requires the insured to report the value of the property insured at certain time intervals
The same as a personal articles floater in that it specifically lists each jewelry item
None of the responses are correct

Question 11 of 100

Answer 11

Your answer: A policy that requires the insured to report the value of the property insured at certain time intervals is correct.

EXPLANATION:
A “Reporting Form” policy is one in which the policyholder is required to report the values of insured property to the company at certain intervals. A provisional (deposit) premium is charged initially and the final premium is determined by applying the rate to the average of the values reported. The insured is required to insure the property 100% to value. The insured is also required to report 100% of the value of the insured property.

Question 11 of 100

Question 12

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 12 of 100

Answer 12

Your answer: 30 is correct.

EXPLANATION:
The change must be reported within 30 days.

Question 12 of 100

Question 13

It is essential that operations at some businesses be continued regardless of circumstances. In the event of property damage to the main facilities, arrangements could be made for use of other facilities. What type of coverage would be most appropriate to protect this business against consequential losses?

Extra Expense Coverage
Contingent Business Interruption Coverage
Leasehold Interest Coverage
Extended Business Income Coverage

Question 13 of 100

Answer 13

Your answer: Extra Expense Coverage is correct.

EXPLANATION:
Some businesses cannot shut down. Hospitals, dairies and banks are a few examples. This coverage will pay for expenses needed to decrease the amount of time the insured’s business is interrupted.

Question 13 of 100

Question 14

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 14 of 100

Answer 14

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 14 of 100

Question 15

The general property flood coverage form for commercial property will settle claims on the basis of:

replacement cost.
replacement cost if the building is insured for at least 80% of the cost to rebuild.
actual cash value.
functional replacement cost.

Question 15 of 100

Answer 15

Your answer: actual cash value. is correct.

EXPLANATION:
The general property flood form is for commercial buildings, co-ops, residential condos in the emergency program and timeshare buildings not in a condo style. But in each case, losses are settled on an actual cash value (ACV) basis only.

Question 15 of 100

Question 16

Which statement is true concerning auto Physical Damage coverage in a Personal Auto Policy?

Can be endorsed to pay on a replacement cost basis.
It can cover owned and nonowned automobiles.
Applies only when the insured is at fault in an accident.
Excludes physical damage to cars over 10 years old.

Question 16 of 100

Answer 16

Your answer: It can cover owned and nonowned automobiles. is correct.

EXPLANATION:
The PAP covers both owned and nonowned vehicles driven by the “insured’s” under the policy. The policy will defend even if the insured is not at fault in an accident. The other three choices are all false statements.

Question 16 of 100

Question 17

Which of the following would be considered a “collision” peril under auto physical damage coverage?

Riot
Striking an animal
Missiles or falling objects
Hitting a pot hole

Question 17 of 100

Answer 17

Your answer: Striking an animal is incorrect. The correct answer is: Hitting a pot hole .

EXPLANATION:
Hitting a pot hole and causing damage to the vehicle (other than the tires) would be a collision peril. The other perils are covered under “other than collision” coverage.

Question 17 of 100

Question 18

Jerry’s car is involved in an accident that has left him without a vehicle to drive. How much, if any, can he collect for his transportation expenses from the policy?

Nothing as it was not stolen.
$20 per day after a 48 hour waiting period.
$20 per day after a 24 hour waiting period.
$30 per day after a 48 hour waiting period.

Question 18 of 100

Answer 18

Your answer: $20 per day after a 24 hour waiting period. is correct.

EXPLANATION:
Transportation expenses are an additional coverage if the insured has purchased collision and/or other than collision coverage. $20 per day up to $600 is available. Coverage begins 48 hours after a theft loss and 24 hours for any other covered loss.

Question 18 of 100

Question 19

Which of the following is NOT a claim settlement option in a property loss?

Replace the property with like kind and quality.
Replace the property with new.
Repair the property.
Pay market value only.

Question 19 of 100

Answer 19

Your answer: Pay market value only. is correct.

EXPLANATION:
Offering market value only is not a claim settlement option. If the insured carries replacement cost coverage then the adjuster needs to address the payment of the claim accordingly.

Question 19 of 100

Question 20

A commercial umbrella liability policy would usually cover which of the following situations?

The insured claimed in a TV ad that the company’s product will allow dieters to lose five pounds per week for four weeks without changing their eating habits. Several dissatisfied customers sued the insured when the product did not cause weight loss.
The insured was sued for knowingly allowing its advertising agency to make untrue statements about a competitor in an advertisement for the insured’s product.
The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry.
The insured borrowed a bulldozer from a friend and damaged it while using the machine.

Question 20 of 100

Answer 20

Your answer: The insured borrowed a bulldozer from a friend and damaged it while using the machine. is incorrect. The correct answer is: The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry..

EXPLANATION:
The owner of the housing unit committed an act covered under personal injury liability coverage.

Question 20 of 100

Question 21

In insurance terms, the party who has been wronged is known as the _____ party, and the person causing the injury is the _____ party.

third / first
first / third
second / first
first / second

Question 21 of 100

Answer 21

Your answer: third / first is correct.

EXPLANATION:
The third party would be the claimant and the person committing the wrongful act would be the first party. The second party is the insurance company.

Question 21 of 100

Question 22

The liability coverage on the BOP would provide coverage for which of the following?

Injury or damage caused by the operation of mobile equipment
An injury that is also covered by Workers Compensation Law
Liability that is caused by the operation of a business auto
Liability resulting from the accidental escape of pollutants

Question 22 of 100

Answer 22

Your answer: Liability that is caused by the operation of a business auto is incorrect. The correct answer is: Injury or damage caused by the operation of mobile equipment.

EXPLANATION:
Injury or property damage to others caused by the operation of mobile equipment on the insured’s premises such as a forklift would be covered by the BOP policy. The other three answers are all specifically excluded.

Question 22 of 100

Question 23

An insured is covered under a DP-2 broad form dwelling policy. A water pipe has burst and the insured has suffered floor and ceiling damage in his two-story home. The cost to remove and replace the walls to get to the pipe is $300.00. The cost to repair the floor is $400.00. The pipe that burst must now be replaced with a more expensive option to meet newer building codes. The cost to replace the pipe is $200.00. How much will the insurer pay?

The policy will pay $300.00
The policy will pay $400.00
The policy will pay $700.00
The policy will pay $900.00

Question 23 of 100

Answer 23

Your answer: The policy will pay $900.00 is incorrect. The correct answer is: The policy will pay $700.00.

EXPLANATION:
The company is not responsible for the pipe that burst but is responsible for the other damages. Even though all the dwelling forms, except the DP-1, provide 10% of the Coverage A limit for ordinance and law as a result of changes in building codes, the policy will not respond to the part that failed, the pipe.

Question 23 of 100

Question 24

QUESTION:
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 24 of 100

Answer 24

Your answer: Pay only the replacement value of the ring and waive any deductible is incorrect. The correct answer is: Pay the ACV of the ring.

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 24 of 100

Question 25

Under the workers compensation guidelines, permanent total disability is rated at what percent?

50%
60%
90%
100%

Question 25 of 100

Answer 25

Your answer: 100% is correct.

EXPLANATION:
Permanent total disability is rated at 100%.

Question 25 of 100

Question 26

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 26 of 100

Answer 26

Your answer: I and II only. is correct.

EXPLANATION:
The “Additional Residence Rented to Others” endorsement provides personal liability (injury) and medical payments to others coverage to cover the insured’s liability arising out of the ownership of a residence regularly rented to others.

Question 26 of 100

Question 27

What does the term “comparative negligence” refer to?

The percentage of fault is shared by each driver in an accident in which both contribute to causing the accident.
The one who is most negligent receives no payment when the claim is settled.
The one who is the least negligent receives no payment when the claim is settled.
If both parties have contributed to causing the accident, neither party receives any payment when the claim is settled.

Question 27 of 100

Answer 27

Your answer: The percentage of fault is shared by each driver in an accident in which both contribute to causing the accident. is correct.

EXPLANATION:
Comparative negligence establishes the percentage of fault shared by each driver in an accident in which both contribute to causing the accident. Comparative negligence laws vary by state.

Question 27 of 100

Question 28

The ABC Office Supply Co. carries $100,000 insurance on a storage building held under a $50,000 mortgage acknowledged in the policy. ABC stores dynamite in the building without informing the insurance company. An explosion destroys the building. What is the maximum the mortgagee can recover?

$50,000
$0
$25,000
$100,000

Question 28 of 100

Answer 28

Your answer: $0 is incorrect. The correct answer is: $50,000.

EXPLANATION:
Even though the insured concealed the fact that the hazard was increased, the mortgagee will still be able to recover the $50,000.

Question 28 of 100

Question 29

Which of the following is an obligation of the insured involving a covered property insurance loss?

Protect the property from further loss
Pay the renewal premium
Settle the claim as soon as possible
Review the coverages of the policy to confirm coverage

Question 29 of 100

Answer 29

Your answer: Protect the property from further loss is correct.

EXPLANATION:
The insured is obligated to protect the property from further loss or damage.

Question 29 of 100

Question 30

A customer has consumed contaminated food manufactured by the U-Eat company. It is discovered that the manufacturer failed to properly clean some of the equipment and as a result the food was spoiled. This is an example of:

Strict liability.
Absolute liability.
Operations liability.
Personal injury.

Question 30 of 100

Answer 30

Your answer: Personal injury. is incorrect. The correct answer is: Strict liability. .

EXPLANATION:
This is an example of strict liability and is most commonly applied in Products Liability claims. Certain parties are held liable without regard to fault or negligence. If the claimant can prove that a product was defective and that the defect caused the injury, the manufacturer can be held strictly liable.

Question 30 of 100

Question 31

What are the required limits of liability for motorcycle drivers in California?

$10,000 each person/$20,000 for multiple injuries for bodily injury claims and $5,000 property damage to others
$15,000 each person/$30,000 for multiple injuries for bodily injury claims and $5,000 property damage to others
$25,000 each person/$50,000 for multiple injuries for bodily injury claims and $15,000 property damage to others
$50,000 each person/$100,000 for multiple injuries for bodily injury claims and $25,000 property damage to others

Question 31 of 100

Answer 31

Your answer: $10,000 each person/$20,000 for multiple injuries for bodily injury claims and $5,000 property damage to others is incorrect. The correct answer is: $15,000 each person/$30,000 for multiple injuries for bodily injury claims and $5,000 property damage to others .

EXPLANATION:
California law requires that motorcycle drivers carry a minimum liability insurance coverage of 15/30/5. This provides $15,000 to cover bodily injuries, $30,000 for all injuries in one accident, and $5,000 for property damages to others.

Question 31 of 100

Question 32

The California Insurance Code (CIC) further details the items required on a valid insurance contract. All of the following are required, EXCEPT:

The parties to the contract.
The insured’s mailing address.
The objects of insurance.
The policy period.

Question 32 of 100

Answer 32

Your answer: The insured’s mailing address. is correct.

EXPLANATION:
The California Insurance Code (CIC) requires six specific items of information be included in an insurance policy issued in California. The insured’s mailing address is not one of them.

Question 32 of 100

Question 33

Rita’s house has an 80% replacement cost value of $200,000. She has it insured for $100,000 under an HO-3 form and suffers a fire loss of $50,000. How much will Rita receive for the loss?

$100,000
$50,000
$25,000
$10,000

Question 33 of 100

Answer 33

Your answer: $50,000 is incorrect. The correct answer is: $25,000.

EXPLANATION:
Rita is 50% insured per the terms of the policy so she will receive only 50% of the loss or $25,000. The company could also offer to pay the claim on an “actual cash value” basis.

Question 33 of 100

Question 34

QUESTION:

Under the livestock coverage form, within how many days must newly acquired livestock be added to the policy?

Answer 34

Your answer: Within 30 days of purchase is correct.

EXPLANATION:
Newly acquired livestock must be reported to the insurance company within 30 days of acquisition, at which time an additional premium will be charged the insured.

Question 34 of 100

Question 35

How are losses settled under a typical inland marine policy?

Actual Cash Value
Replacement Cost
Functional Replacement Cost
Cost to repair only basis

Question 35 of 100

Answer 35

Your answer: Actual Cash Value is correct.

EXPLANATION:
Most inland marine policies pay on an actual cash value basis.

Question 35 of 100

Question 36

Which of the following is the provision in a liability policy that allows an insured to report incidents or circumstances that result in claims being filed in the future?

Defense Within Limits provision.
Other Insurance provision.
Supplementary Payments provision.
Discovery provision.

Question 36 of 100

Answer 36

Your answer: Supplementary Payments provision. is incorrect. The correct answer is: Discovery provision..

EXPLANATION:
The Discovery provision allows an insured to report incidents or circumstances that may result in a claim being filed in the future. This provision is found mainly in liability policies with “claims-made” coverage triggers.

Question 36 of 100

Question 37

What does the Leasehold Interest Endorsement provide?

Covers a building tenant, when a favorable lease is cancelled because of loss or damage.
Covers the landlord for their loss of rents under a lease when the structure is destroyed by an insured peril.
Guarantees the continuation of a favorable lease to the tenant when premises are damaged by an insured peril.
Provides moving and relocation expenses of a tenant when the lease is cancelled because of damage to the building caused by an insured peril.

Question 37 of 100

Answer 37

Your answer: Covers the landlord for their loss of rents under a lease when the structure is destroyed by an insured peril. is incorrect. The correct answer is: Covers a building tenant, when a favorable lease is cancelled because of loss or damage. .

EXPLANATION:
Leasehold interest insurance protects against financial loss suffered by a building tenant, when a favorable lease is cancelled before expiration because of loss or damage to the building by an insured cause of loss.

Question 37 of 100

Question 38

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 38 of 100

Answer 38

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 38 of 100

Question 39

Each of the following is a comprehensive loss under the physical damage coverage of a Commercial Auto policy, EXCEPT:

Damage to a covered auto caused by hail during a thunderstorm.
Damage caused when the auto overturned on a sharp curve.
Damage to the auto caused by flood waters.
Damage caused when vandals spray-painted graffiti on the auto.

Question 39 of 100

Answer 39

Your answer: Damage to the auto caused by flood waters. is incorrect. The correct answer is: Damage caused when the auto overturned on a sharp curve..

EXPLANATION:
Damage caused by overturn is considered to be a “collision” claim. The other three answer choices are all “comprehensive” or “other than collision” losses.

Question 39 of 100

Question 40

What are the unique features of the ISO standardized Businessowners policy form?

The BOP provides “Owned Auto” and “Ocean Marine” coverage.
The BOP premium is adjustable, and is based on number of employees in the coverage business.
The BOP provides “open peril” coverage for property.
The BOP has fewer exclusions than other commercial property policies.

Question 40 of 100

Answer 40

Your answer: The BOP provides “open peril” coverage for property. is correct.

EXPLANATION:
The BOP is unique in that it includes favorable property insurance provisions, including open peril coverage.

Question 40 of 100

Question 41

All of the following are reasons an independent adjuster may be hired, EXCEPT:

The insured may retain an independent adjuster if negotiations with their insurer are not progressing forward.
An insurer may contract with an independent adjuster in a location where the insurer does not have claims offices set up.
Due to a catastrophe, an insurer may not have enough adjusters on staff to process all of the claims, and would contract with additional independent adjusters temporarily.
An insurer may contract with an independent adjuster who has special knowledge or expertise to adjust specialized claims.

Question 41 of 100

Answer 41

Your answer: The insured may retain an independent adjuster if negotiations with their insurer are not progressing forward. is correct.

EXPLANATION:
Retaining an adjuster to assist in negotiating a claim with the insurer would be a reason to hire a PUBLIC adjuster, not an INDEPENDENT adjuster.

Question 41 of 100

Question 42

With a Commercial Package Policy (CPP), “interline endorsements” are endorsements that:

Apply to more than one coverage part of the package policy.
Are attached to the common Declarations page.
Apply only to the common policy conditions within the package policy.
Apply only to the Commercial Property coverages within the package policy.

Question 42 of 100

Answer 42

Your answer: Apply only to the Commercial Property coverages within the package policy. is incorrect. The correct answer is: Apply to more than one coverage part of the package policy. .

EXPLANATION:
More than one line of insurance can be written to create a Commercial Package Policy. The purpose of a package policy is to decrease the number of forms. Interline endorsements, such as the cancellation and non-renewal provision, that vary by state, would apply to all sections of the policy.

Question 42 of 100

Question 43

A commercial property policy specifies which of the following responsibilities as a duty of the insured?

To provide a proof of loss statement following a loss if requested by the company.
To return the policy if it is canceled by the insurance company.
To pay the bank in full in the event of a total loss.
To pay premiums within thirty days after receiving an invoice.

Question 43 of 100

Answer 43

Your answer: To provide a proof of loss statement following a loss if requested by the company. is correct.

EXPLANATION:
If the insured reports a covered loss, the insurer may request the insured to complete a proof of loss statement. If this request is made, the insured must complete the proof of loss relatively quickly. Some policies give the insured only 60 days to complete the proof of loss after the insurer makes its request.

Question 43 of 100

Question 44

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 44 of 100

Answer 44

Your answer: 30 days is correct.

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

Question 44 of 100

Question 45

On the basic dwelling policy all of the following perils are excluded, EXCEPT:

War
Landslide
Earthquake
Volcanic eruption

Question 45 of 100

Answer 45

Your answer: Volcanic eruption is correct.

EXPLANATION:
Under the DP-1 basic form, war, earthquake and landslide are not named perils and are, therefore, excluded.

Question 45 of 100

Question 46

Miranda’s home is covered under a Homeowners policy with an Earthquake Endorsement attached. She has selected the base deductible of 5% and her limit of liability under Coverage C is greater than Coverage A. Her Coverage C limit of liability is $1,000. What is the deductible that Miranda will have to pay?

$50
$5
$5,000
$500

Question 46 of 100

Answer 46

Your answer: $50 is incorrect. The correct answer is: $500.

EXPLANATION:
Although 5% multiplied by $1,000 is $50, the endorsement states that the deductible will never be less than $500.

Question 46 of 100

Question 47

Which party has the right to request information about a claim at any time?

The California Department of Insurance
The plaintiff’s attorney
Law enforcement
The agent

Question 47 of 100

Answer 47

Your answer: The California Department of Insurance is correct.

EXPLANATION:
Only the California Department of Insurance (CDI) has the absolute right to request and be provided any claim information at any time. A plaintiff’s attorney may subpoena such information, but it may be considered private information. Law enforcement would also need a subpoena for claim information.

Question 47 of 100

Question 48

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 48 of 100

Answer 48

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 48 of 100

Question 49

An insured travels to Europe and has her fur coat stolen. The fur is worth $1,000. She is insured under an HO-4 contents policy. What will be paid by the insurer?

$1,000 less the deductible
Nothing because the property is out of the US
$500
Furs are excluded for theft coverage

Question 49 of 100

Answer 49

Your answer: $1,000 less the deductible is correct.

EXPLANATION:
Personal property is covered on a worldwide basis. Theft is an insured peril. The value of the fur falls within the theft limitation for furs. Therefore, the loss will be paid less the deductible.

Question 49 of 100

Question 50

Supplementary payments under the liability section of a commercial auto policy include the cost of a bail bond up to:

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

Question 50 of 100

Answer 50

Your answer: $2,500. is incorrect. The correct answer is: $2,000..

EXPLANATION:
Supplementary payments include the cost of a bail bond up to $2,000 including bonds for related traffic offenses required because of an accident. The insurer is not required to furnish the bond.

Question 50 of 100

Question 51

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 51 of 100

Answer 51

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 51 of 100

Question 52

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 52 of 100

Answer 52

Your answer: 10 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 52 of 100

Question 53

An insured had a $300,000 underlying liability policy and a $1 million umbrella liability policy with a $300,000 retained limit and a $2,000 self-insured retained limit. An occurrence resulted in $400,000 in personal injury damages which are not excluded by either policy. Shortly thereafter the insurer providing the underlying policy became insolvent. How much of the damages would be covered by the umbrella liability policy?

$100,000
$300,000
$398,000
$400,000

Question 53 of 100

Answer 53

Your answer: $100,000 is correct.

EXPLANATION:
The fact that the underlying insurer became insolvent has no bearing on the retained limit. It would still pay the excess of $100,000 over the retained (underlying) limit of $300,000.

Question 53 of 100

Question 54

In crime insurance terminology, an officer of the company, having custody of insured property off the insured premises, is known as a/an:

Messenger.
Custodian.
Scheduled executive.
Insured property executive.

Question 54 of 100

Answer 54

Your answer: Custodian. is incorrect. The correct answer is: Messenger. .

EXPLANATION:
A messenger means the named insured, any of the insured’s partners or employees, while having care and custody of the property outside the premises.

Question 54 of 100

Question 55

Under a surety bond, the owner of the project is called the:

Obligee.
Surety.
Principal.
Administrator.

Question 55 of 100

Answer 55

Your answer: Principal. is incorrect. The correct answer is: Obligee. .

EXPLANATION:
The obligee would be the owner of the project for whom the work is being performed by the contractor. The contractor purchases the bond from the surety and pays the premium for the bond.

Question 55 of 100

Question 56

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 56 of 100

Answer 56

Your answer: All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies. is correct.

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

Question 56 of 100

Question 57

Under a surety bond, the “principal” is the party that:

Agrees to fulfill an obligation.
Agrees to pay damages if default occurs.
Provides the bond in exchange for a fee.
Will be paid damages if default occurs.

Question 57 of 100

Answer 57

Your answer: Agrees to fulfill an obligation. is correct.

EXPLANATION:
The bond guarantees the performance of the principal. A building contractor would be an example of a principal under a performance bond.

Question 57 of 100

Question 58

The insured has several locations and desires to insure his contents coverage. His agent advises him to complete a statement of values form and issues a policy with one limit to cover all locations. This is an example of:

Specific coverage.
Reporting form coverage.
Blanket coverage.
Location basis.

Question 58 of 100

Answer 58

Your answer: Blanket coverage. is correct.

EXPLANATION:
This is an example of “blanket” coverage where all locations are covered under one limit.

Question 58 of 100

Question 59

Alec goes to an amusement park and rides a roller coaster that was designed to flip the riders upside down. Alec is taller than the average person so when the roller coaster flips, he hits his head on the safety bar. After receiving medical care, Alec files a claim against the amusement park, seeking payment for his medical bills, pain and suffering. What defense against negligence would the amusement park most likely use to deny this claim?

Assumption of Risk
Contributory Negligence
Comparative Negligence
Intervening Cause

Question 59 of 100

Answer 59

Your answer: Assumption of Risk is correct.

EXPLANATION:
The “Assumption of Risk” defense applies when a person knowingly exposes him/herself to danger or injury.

Question 59 of 100

Question 60

Adjusters have a relationship to the legal profession, and must exercise care to avoid the unauthorized practice of law. In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS:

He/she is a licensed independent adjuster.
He/she has graduated from an accredited law school.
He/she is an active member of the State Bar of California.
He/she is a licensed public adjuster.

Question 60 of 100

Answer 60

Adjusters have a relationship to the legal profession, and must exercise care to avoid the unauthorized practice of law. In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS:

He/she is a licensed independent adjuster.
He/she has graduated from an accredited law school.
He/she is an active member of the State Bar of California.
He/she is a licensed public adjuster.

Question 60 of 100

Question 61

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

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

Question 61 of 100

Answer 61

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 61 of 100

Question 62

In a situation where liability is obviously clear and an insurer refuses to settle, which of the following is correct according to the California Insurance Code?

The insurer has the right to delay payment for a period of up to six months even when liability is clear.
The insurer is permitted to exercise the right of appeal.
The insurer has the right to delay payment for a period of up to 90 days months even when liability is clear.
The insurer is committing an unfair claims settlement practice in California.

Question 62 of 100

Answer 62

Your answer: The insurer is committing an unfair claims settlement practice in California. is correct.

EXPLANATION:
Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear is an unfair claims settlement practice in California.

Question 62 of 100

Question 63

Which of the following policy provisions would be found in a Workers Compensation policy “conditions” section?

Certain rights of the insurer and insured
The named insured and limits of liability
The promises made by the insurer
All of the responses apply

Question 63 of 100

Answer 63

Your answer: All of the responses apply is incorrect. The correct answer is: Certain rights of the insurer and insured.

EXPLANATION:
The “conditions” section of the Workers Compensation policy contains five clauses: the insurer’s right of inspection, the long-term policy condition, transfer of the insured’s rights and duties, the right of cancellation by either party, and the first-named-insured condition.

Question 63 of 100

Question 64

Which statement best describes “defense” coverage under the Section II - Liability coverage of the Businessowners policy?

Defense costs are not subject to a limit.
Defense costs are included in the aggregate limit of insurance.
Defense costs are paid but limited to claims submitted during the policy period.
Defense costs are paid at twice the limit of the policy.

Question 64 of 100

Answer 64

Your answer: Defense costs are not subject to a limit. is correct.

EXPLANATION:
Defense coverage is not subject to a policy limit. The insurer can spend whatever it desires in the defense of a claim and it has no effect on the policy limit.

Question 64 of 100

Question 65

The additional coverage under the Commercial Property policy for electronic data provides $2,500 for the cost of replacing and restoring lost information contained on electronic media. Which of the following types of electronic data is NOT included in this additional coverage?

Data controlling the building elevator
Data controlling the heating, ventilation, lighting and air conditioning systems
Data controlling the building security system
None of these items are subject to this limit

Question 65 of 100

Answer 65

Your answer: None of these items are subject to this limit is correct.

EXPLANATION:
None of these items are subject to the $2,500 annual aggregate limitation and therefore, covered up to the full cost to restore these items up to the building limit.

Question 65 of 100

Question 66

If an employee is killed as a result of a violation of the “serious and willful conduct” rule, there is an exception regarding a reduction in benefits when:

I. The injury is caused by the employer’s failure to comply with safety laws when the disability from the injury sustained is 70% or more
II. The injured employee is under 16 years of age at the time of injury.

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

Question 66 of 100

Answer 66

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

EXPLANATION:
Both of these situations are exceptions regarding a reduction of benefits when an employee violates the serious and willful conduct rule.

Question 66 of 100

Question 67

Angie has suffered an automobile physical damage loss. All of the following are the insured’s duties after a loss under Angie’s personal automobile policy, EXCEPT:

Take reasonable steps after the loss to protect the property from further damage.
Promptly notify the police if the vehicle is stolen.
Allow the insurer to inspect and appraise the damaged property.
Facilitate the repairs to the vehicle and submit the invoice to the insurer.

Question 67 of 100

Answer 67

Your answer: Take reasonable steps after the loss to protect the property from further damage. is incorrect. The correct answer is: Facilitate the repairs to the vehicle and submit the invoice to the insurer..

EXPLANATION:
The insured is not permitted to make repairs on the vehicle until after the vehicle has been inspected and/or appraised and an agreement as to the damages has been reached with the insurer.

Question 67 of 100

Question 68

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 68 of 100

Answer 68

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 68 of 100

Question 69

The Section I - Property conditions of the California Homeowners Special Provisions form states that if loss or damage relates to a state of emergency under California law, the insured has an extended amount of time after the insurer’s payment of actual cash value, to notify the insurer of the intent to make a replacement cost claim under the HO-2, HO-3, and HO-5 forms. How long is this extended period of time?

12 months.
24 months.
36 months.
9 months.

Question 69 of 100

Answer 69

Your answer: 12 months. is incorrect. The correct answer is: 24 months..

EXPLANATION:
When the loss or damage related to a state of emergency under California law, the insured has 24 months following the insurer’s payment of actual cash value, to make a claim for replacement cost settlement. If the loss or damage results from a cause other than a declared state of emergency, the California Special Provisions form requires that the insured make the replacement cost claim within 12 months.

Question 69 of 100

Question 70

In cases involving the repair of an auto in California, no insurer may:

All of the responses are correct.
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, to obtain a repair estimate or to have the automobile repaired at a specific shop.
Suggest or recommend that an automobile be repaired at a specific repair shop, unless all of the requirements set forth in the California Insurance code, section 758.

Question 70 of 100

Answer 70

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

EXPLANATION:
All of these responses are correct regarding the repair of an auto.

Question 70 of 100

Question 71

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 71 of 100

Answer 71

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 71 of 100

Question 72

The insured has a CGL policy with a $600,000 aggregate limit and a $300,000 per occurrence limit. The insured has one claim for $350,000 and another for $100,000. How much of the aggregate limit will remain for future claims?

$200,000.
$50,000.
$600,000.
$400,000.

Question 72 of 100

Answer 72

Your answer: $200,000. is correct.

EXPLANATION:
The policy can only pay $300,000 on the first claim and the full $100,000 for the second claim. The total of the two claims is $400,000 and leaves $200,000 of the aggregate limit.

Question 72 of 100

Question 73

A statement of fact given by an applicant at the inception of a policy is a:

Guarantee
Stipulation
Warranty
Resolution

Question 73 of 100

Answer 73

Your answer: Guarantee is incorrect. The correct answer is: Warranty.

EXPLANATION:
A statement of fact is usually considered to be a warranty. In some types of insurance, coverage is voided if the statement of fact is not true. Ocean marine insurance is an example.

Question 73 of 100

Question 74

A maid in a hotel neglects to lock a guest’s hotel room door after cleaning the room. Thieves enter the room and steal the guest’s clothing and laptop. What Commercial Crime coverage does the hotel need to cover the loss?

Kidnap/Ransom Extortion
Employee Theft
Guest’s Property
Computer Fraud

Question 74 of 100

Answer 74

Your answer: Guest’s Property is correct.

EXPLANATION:
The Commercial Crime form known as “Guests Property” would cover the loss to guest’s property inside the premises of the hotel.

Question 74 of 100

Question 75

In order for a “full release settlement” to become closed, what MUST occur?

The release must contain the proper names of both the first and third party.
The release must contain the date, time and place that the accident occurred.
The release must be properly signed.
The claim check must be cashed by the claimant.

Question 75 of 100

Answer 75

Your answer: The claim check must be cashed by the claimant. is correct.

EXPLANATION:
The claim check for damages must be cashed by the claimant.

Question 75 of 100