Kaplan PA Law Supplement QBank Flashcards
Who is exempt from the continuing education requirements in PA?
- business entities
- licensees who have only limited lines licenses
- nonresidents who have complied with their home state’s requirement
The workers compensation statute in PA includes who in its definition of employer?
- natural persons
- partnerships
- joint stock companies
- corporations (both for profit and not for profit)
- municipal corporations
- the Commonwealth (including all government corporations created by it)
Before selling insurance policies for an insurer, a producer must first:
be appointed by the insurer before they can act as a representative of the insurer
Uninsured and Underinsured motorists coverage in PA
The purchase of uninsured motorist and underinsured motorist coverage is optional but must be included unless the named insured signs a written rejection form
- coverages must be offered in amounts equal to the bodily injury liability limits
- coverage can be less than the bodily injury liability limits if requested by the insured
- the two types of insurance must be sold separately by insurers
Under the PA motor vehicle financial responsibility law, a statute of limitations applies to recovery of first-party benefits. When benefits have not been paid, any action to recover first-party benefits must begin within
four years from the accident date
If benefits have not been paid, an action for first-party benefits must begin within four years from the date of the accident
Requirements for the Insurance Department to issue a resident or nonresident insurance producer license when the applicant
- is at least 18 years of age
- has not committed any act that is prohibited under the state’s insurance laws
- has satisfied the prelicensing education requirements
- has passed (or is exempt from) the insurance producer licensing examination
- has paid all applicable fees
- possesses the general fitness, competence, and reliability sufficient
Unfair claim practices include
- failing to investigate and pay claims promptly
- misrepresenting the amount of coverage under a policy
- failing to respond promptly to communications on claims
insurer is entitled to investigate a claim when the cause of the insured’s death is uncertain and the insurer wants to determine coverage under the policy
Once a policy covering commercial property and casualty risks has been in effect for 60 days, all of the following reasons may serve as a basis for midterm cancellation of the policy
- the insured failed to pay a premium when due
- the insured requests the cancellation
- the insured made a material misrepresentation affecting the insurability of the risk
NOT for the business owning the property suffering a financial setback
In PA, notice of nonrenewal of a commercial policy must be given to the named insured at least:
60 days in advance
How often must the Commissioner examine a domestic insurer?
At least once during a 5-year period, but may investigate an insurance company whenever it is necessary
Benefits from an auto insurer are overdue if not paid within how many days after the insurer receives proof of the amount due?
30 days
Payment of commissions
- a producer may not charge additional fees not included in his commissions for soliciting and procuring insurance or for servicing existing policyholders
- a producer may share commissions with another licensed producer
- a producer may not share commissions with unlicensed persons
- a producer may share commissions with a nonresident producer as long as she is licensed in the line of insurance involved in the transaction
A licensee whose license has lapsed has how much time to reinstate it without reapplying as a new licensee?
12 months to renew the license, pay the fee, and complete the continuing education
The insurance industry in the US primarily is regulated by the:
states, rather than the federal government as determined by the 1868 Supreme Court case of Paul v. Virginia
A producer who converts premiums for his own use
breach of fiduciary duty
A binder for temporary fire insurance is good for how many days?
30 days
A written note that temporarily obligates an insurer to provide insurance before a contract has been written or the premium paid is called a
binder
Pennsylvania workers’ compensation law
- compulsory for all private and public employments except for classes of exempt employees, such as domestic employees, part-time workers, and other defined classes
- usually compensation benefits are the exclusive remedy against the employer
- employers are generally required to provide statutory benefits for work-related injuries
- employers may formally self-insure instead of purchasing private insurance
PA FAIR plan
- stabilize property conditions in the state
- provide insurance to property owners when it is not available in the normal market
- provide a reinsurance pool involving all fire insurance companies in the state
PA Property and Casualty Insurance Guaranty Association
protects policyowners, beneficiaries, and claimants from insolvent insurers
When an insurer sends a notice of cancellation of a property or casualty policy to an insured, the notice must advise the insured of the right to request a review of the insurer’s action within
10 days after the receipt of notice
Temporary producer license
- the lines of authority under the license may be limited
- the license may be revoked immediately and without notice
- the license holder may be required to have a sponsoring insurer
- may not be transferred to another person
Minimum age a person may apply for an insurance producer’s license
18 y/o
Insurer’s cancellation of a policy covering an owner-occupied dwelling
- must include the specific reasons for cancellation
- the insured may appeal the cancellation to the Insurance Department
- must advise the insured of possible eligibility for coverage under the FAIR plan
- can be cancelled for non-payment of premium, if there are substantial increases in the hazard, or if a material misrepresentation is present
The Insurance Commissioner is responsible for
- issuing certificates of authority
- enforcing provisions of the insurance code
- conducting insurance investigations
Insurance laws are enacted by the state legislature
The workers compensation benefit for total disability
66.67% of the average weekly wage
If an insurer initiates the midterm cancellation of a policy coverage commercial property risks, any unearned premium must be returned to the insured within what period of time of the effective date of the cancellation?
10 days
If the insured cancelled the policy, the insurer must return any unearned premium no later than 30 days after the effective date of the cancellation
To motivate a buyer to sign an application for insurance, a producer promises a gift of one-half of the commission. This is an example of:
rebating
- it is illegal for insurers or producers to induce applicants to purchase insurance by making agreements that are not specifically in the insurance contract, like rebating part or all of a premium
Unfair trade practices
- making derogatory statements regarding an insurer’s financial condition
- offering advantages in dividends that were not specified in the policy
- rebating premiums
Limited tort insurance vs. full tort
limits an insured and members of their household’s ability to seek financial recovery for noneconomic losses such as pain and suffering
Insurance producer appointment
an insurance producer is a person appointed in writing by an insurance company to represent that company in selling insurance, soliciting applications, and (if authorized by the insurer) countersigning policies on the insurer’s behalf. A producer represents the company and has the power to bind it to insurance contracts
PA FAIR Plan Act
provide property owners with fire, extended coverages, vandalism, and malicious mischief coverage when insurance is unable to be purchased in the normal or standard market; for people unable to obtain coverage in the normal market and helps to improve and stabilize property conditions in the state
FAIR Plan Association
an underwriting entity called the Insurance Placement Facility of PA; a reinsurance pool involving all fire insurance companies in PA; participation in the pool is in proportion to the amount of fire insurance written by companies in PA
Federal Crop Insurance (RMA)
- indemnifies the insured for loss of yield to growing crops prior to harvest, and to harvested crops in storage
- provided by private carriers able to offer broad multiperil crop insurance that includes losses due to adverse weather, flood, drought, insect damage, etc.
- USDA sells coverage through FCIC licensed producers and reinsures some of the coverage written by private carriers
Crop insurance
- policy covers lost revenue from damaged crops
- transit of harvested crops, fire dept. service charges, catastrophic loss, and replanting
- rating considers: max num years experience, smallest geographic units, frequent revision of rates based on seasonal activity
Crop insurance exclusions
- failure of the insured to cut, dig, pick, pull, or harvest mature crops
- harvester’s inability to recover that portion of the crop
- buds, blooms, or blossoms of a crop
- leaves, vines, bushes, stalks, or squares of any crop except to the extent that the marketable crop is affected
- trees or bushes of any nut or fruit crop
- nuclear hazard
- contamination
In PA, a producer’s term of licensure is
2 years
What is the maximum period of time within which an insurance producer can reinstate a lapsed license without having to reapply for the license?
1 year
People who must be licensed to transact insurance business in PA
- producers who work for more than one insurance company
- insurance producers who hold their Chartered Life Underwriter (CLU) designation
- producers who specialize in annuities
NOT the CFO of an insurer who does not solicit or negotiate risks
What is the maximum term of a temporary license that is issued as a result of a licensee’s death?
180 days
To be qualified for an insurance producer license in PA, an individual applicant must have reached the age of
18
The Commissioner may deny, revoke, or suspend a producer license for
- committing a felony
- providing false information in a license application
- misappropriating money being held in a fiduciary capacity
NOT failing to meet the annual production quota as determined by the insurer
Once appointed, a producer’s appointment extends
until the appointment is terminated by the appointing insurer
Executing the insurance laws of PA is whose responsibility?
Insurance Commissioner
Unless exempt, insurance producers must complete how many hours of approved continuing education courses during each two-year license period?
24
In PA, producer appointments are made by
insurers
The law requires that licensed producers advise the Insurance Department of a change in their residential or business addresses within how many days of such a change?
30
To motivate a buyer to sign an application for insurance, a producer promises a gift of 50% of the commission. This is an example of
rebating
An insurance company’s license to do business in PA is called
a certificate of authority
In PA, all of the following are considered unfair trade practices EXCEPT
defamation, misrepresentation, replacement, rebating
replacement
The practice of using misrepresentation to induce any person to lapse, forfeit, surrender, exchange, or convert an insurance policy is also known as
twisting
Prohibition against which of the following insurance practices extends to consumers as well as producers
twisting, rebating, misrepresentation, defamation
rebating
An insurer must notify an insured at least how many days before increasing the premium on a commercial casualty insurance policy?
30
PA Insurance Guaranty Association
- helps in the detection and prevention of insurer insolvencies
- it is illegal to advertise the existence of the Association as an inducement to purchase insurance
- all insurers must participate in the Association as a condition of their authority to write property and casualty insurance policies in the state
The general guidelines given to insurers when developing rates for various insurance products include
- not excessive
- not unfairly discriminatory
- adequate
The purpose of the PA Property and Casualty insurance Guaranty Association is to
protect the public by paying legitimate claims when the insurer is insolvent
In order to cancel residential property insurance in PA, an insurer must do all of the following
- notify the insured of the specific reasons for the cancellation
- provide at least 30 days’ written notice
- advise the insured of his possible eligibility for property coverage under the FAIR Plan
Insurance commission or fee
- Lenny, a retired insurance producer who no longer maintains a license but whose book of business generates policy renewals
- Patricia, an employee benefits attorney who refers a business client to a producer specializing in group insurance
Both of these people could be paid an insurance commission or fee
Licensed insurance companies are subject to examination by the Department of Insurance at least
once every five years
The Insurance Commissioner is responsible for all of the following duties
- enforcing provisions of the Insurance Code
- issuing certificates of authority
- conducting insurer investigations
By examining an insurer’s records, the Insurance Commissioner assesses the company’s
compliance with state laws
Before applying for the insurance producer licensing examination, an individual must complete a minimum of
24 credit hours of approved prelicensing courses, with at least three of those 24 credit hours on ethics
An insured submits a notice of loss to his insurer, with all additional and necessary information, on January 1. As a general rule according to PA law, by what date must the insurer complete its claims investigation?
January 31
A producer who knowingly violates the state’s unfair trade practices law may be fined up to
$5,000 for each violation
All of the following are violations of PA insurance law EXCEPT
- a licensed producer recommending the replacement of a life insurance policy for an annuity contract
violations
- a licensed producer sharing a portion of his commission with a first-time insurance buyer
- a licensed producer accepting business that was solicited by a person who is not a licensed producer
- requiring a consumer to purchase insurance from a designated financial institution as a condition of taking out a loan
Producers must report any criminal charge to the Commissioner within how many days of the charge?
30
All of the following are allowable activities for an individual who holds a temporary license
- perform any acts necessary to keep a deceased producer’s business going until the estate is settled
- renew the business of a deceased producer
- maintain the business of a disabled producer
NOT procure new business from a deceased producer’s existing clients
Which of the following statements about crop insurance is NOT correct?
- crop insurance does not apply until a crop is visible above the ground
- vulnerability of specific crops is factored into rating
- multiperil crop insurance is written on an open-perils basis
NOT correct
- a crop can be insured up to only 75% of its expected value
Which of the following statements regarding a binder for a fire insurance policy is NOT correct?
- they are contracts for temporary insurance
- they contain all the terms of the policy giving rise to the binder, including endorsements
- a binder will expire when the policy is issued
NOT correct
- they are good for 90 days
An individual who cannot obtain basic property insurance in the standard market may obtain this coverage from
the PA Fair Plan
Under PA law, an insurer may do which one of the following with regard to the provision of uninsured motorists coverage?
provide coverage for the same amount as the policy’s bodily injury liability limits
According to PA law, first-party benefits provided by an auto policy must include minimum coverage for medical benefits in the amount of
$5,000
Which option lets the insured seek recovery for all medical and other out-of-pocket damages, pain and suffering, and other nonmonetary damages as a result of injuries caused by other drivers?
secondary tort, full tort, limited tort, assigned tort
Full tort option
Which of the following are the minimum limits of liability any individual must provide for bodily injury and property damage?
15/30/10, 15/30/5, 25/50/15, 25/50/25
15/30/5
Under workers’ compensation law in PA, the waiting period which must be satisfied before benefits are payable is
7 days
If Bob dies as a result of an accident while working in a coal mine, what amount is payable for his reasonable funeral and burial expenses under PA workers’ compensation laws?
$7,000
When an employer must provide workers’ compensation insurance but is unable to do so through normal channels, which organization can provide the required coverage?
State Workers Insurance Fund
Under the PA workers’ compensation law, which of the following would NOT be covered?
Heart-related illness resulting from hereditary causes
Which employees are covered by PA workers’ compensation laws?
a full-time secretary at a church
NOT
- a domestic servant
- a gardener who works for a family only in the summer
- a real estate agent
Which program provides motor vehicle insurance to those applicants who would otherwise be uninsurable?
PA Auto Insurance Plan
When an automobile policy is cancelled for a reason other than nonpayment of premium, how many days’ notice must be provided to the insured?
60
If an insured’s driver’s license has been suspended, the insurer may cancel the automobile insurance policy by giving how many days’ notice?
15
An automobile policy may be cancelled for all of the following reasons
- making a false statement in the insurance application
- failure of the insured to pay the policy premium
- suspension or revocation of the insured’s driver’s license
Which of the statements about the nonrenewal of automobile policies is CORRECT?
- at least 60 days’ written notice must be given prior to nonrenewal
NOT correct
- an insurer can refuse to renew a policy based on the insured’s occupation, including military service
- an insurer can refuse to renew a policy because another insurer has cancelled a prior policy
- an insurer cannot refuse to renew a policy because the insured’s driver’s license has been suspended
All owners of motor vehicles in PA must have in effect at least the following legal liability coverage for bodily injury or death arising out of the use of the motor vehicle to a limit of what amount?
$15,000 to any one person in any one accident
Which of the following statements regarding uninsured and underinsured motorist coverage in PA is CORRECT?
the insured may reject both types of coverage by signing a waiver form
NOT correct
- insurers are only required to offer uninsured motorists coverage in PA
- the insured may reject underinsured motorists but not uninsured motorists
- both must be included in all policies and cannot be rejected
An employee who suffers a total disability is entitled to payment of what percentage of his average weekly earnings?
66&2/3%
Which of the following individuals is entitled to workers’ compensation benefits?
Anna, who is injured because of her co-worker’s negligence
NOT
- brian, who intentionally injures himself on the job
- ted, who injures himself while recklessly operating his employer’s forklift
- susan, who is injured on the job while intoxicated
Which of the following is NOT a benefit provided under a workers’ compensation policy?
medical benefits, partial disability, total disability, elective surgery
elective surgery
Which of the following would describe a producer engaging in the unlawful act of rebating?
a producer pays the premiums for a policyholder with the expectation that the policyholder will pay her back
NOT
- the producer added coverage requiring additional premium to a policy without telling the policyholder
- the producer coerced a policyholder to switch insurance to the producer, by making false statements
- the producer received premiums from a policyholder and put the money in an account that only contains premiums to be sent to insurers
Exclusive agents do NOT have the responsibility for
licensing producers
they are responsible for
- delivering policies
- soliciting applications for insurance
- collecting premiums
The head of the department of insurance can suspend a producer’s license for all of the following reasons EXCEPT
making conservation efforts regarding the replacement of policies
CAN suspend for
- signing the licensed office manager’s name on the insurance application for her when she was out to lunch
- making a statement on a licensing application that is mostly true
- temporarily placing premiums in the producer’s personal checking account to facilitate electronically transmitting ALL premiums to the insurer
All of the following are considered to be unfair and deceptive trade practices EXCEPT
issuing checks in full settlement of a claim that contain language releasing the insurer from liability
an insurer may properly condition full payment of a claim upon the claimant’s releasing the insurer from liability
The producer’s 16-year-old son works in her insurance sales office. The producer would like to pay the son for insurance sales
insurance sales compensation may not be paid to the son
A certificate of authority authorizes an insurer to do business in a state. Which insurers are not required to have a certificate of authority?
surplus lines insurer
By examining an insurer’s records, the head of the department of insurance assesses the insurer’s
compliance with state laws
The chief officer of the state insurance department is NOT responsible for
enacting insurance laws
In order to sell insurance for an insurer, the producer must first
be appointed by that insurer
All of the following are duties of insurance licensees
- comply with continuing education requirements
- file any fictitious/assumed name the licensee uses for business purposes
- notify the Department of Insurance of a change of address
NOT file the list of agency appointments with the Department of Insurance
Examples of misrepresentation
- an insurer advertises a life insurance policy as a retirement savings plan
- an agent tells a prospect that the insurer has a high A.M. Best rating than is actually true
- an agent participates in twisting
- stating that policy dividends are guaranteed
NOT an agent tells a prospect that the policy has achieved a certain level of dividends for the past 5 years
Acts requiring a person to be licensed as a producer include all of the following
- selling insurance policies
- soliciting insurance policies
- negotiating insurance sales
NOT advertising insurance policies
Example of unfair discrimination
an insurer assigns a premium rating to an applicant because of studies that suggest members of the applicant’s race have a shorter than average life expectancy
To increase sales activity as a new agent, Norm offers two nights’ stay at a nice downtown hotel to the first 10 clients who purchase a homeowners, auto, and life insurance policy with his agency. Norm is guilty of
rebating
A producer’s license may be revoked for all of the following activities
- general incompetence
- misrepresenting insurance policy provisions
- a fraudulent application for license
NOT soliciting controlled business (*eg close family members)
National Association of Insurance Commissioners
a self-regulatory, volunteer body made up of state insurance commissioners or superintendents. The organization consists of working committees that examine all aspects of the insurance business. By developing model laws, the NAIC encourages uniformity among the states in insurance laws
