Practice Exam Questions III

Question 1

The Home Day Care Coverage endorsement imposes a policy year aggregate limit for liability and medical payments coverage combined. The amount of this limit:

Answer Choices: Select the Correct Answer
Corresponds to the Coverage E limit shown on the Declarations page of the policy.
Is scheduled on the endorsement.
Is a specified amount of Coverage C.
Is subject to a $500 deductible.

Answer 1

Corresponds to the Coverage E limit shown on the Declarations page of the policy. is correct.

EXPLANATION:
This limit corresponds to the Coverage E limit shown on the Declaration page.

Question 2

Which of the following is NOT an uninsured vehicle as defined by Part C of the personal automobile policy?

Answer 2

The correct answer is: A vehicle owned or operated by a governmental unit or agency.

EXPLANATION:
A vehicle owned or operated by a governmental unit (city or town) or agency is NOT considered to be an “uninsured vehicle”.

Question 3

Which of the following losses is NOT excluded under Part D of a standard Personal Auto policy?

Answer Choices: Select the Correct Answer
Glass breakage.
Damage to equipment designed for the detection of radar.
Loss caused by freezing of the cooling system.
Loss of custom furnishings in a customized van.

Answer 3

Glass breakage. is correct.

EXPLANATION:
An exception is made in the policy to allow coverage while the vehicle is involved in a car pool. Coverage is excluded if the vehicle is used as a livery. The other three choices are excluded. Coverage for the custom furnishings in a van must be added by endorsement.

Question 4

The supplementary payments of Section II - Liability of the Business Automobile policy covers the cost of a bail bond up to:

Answer Choices: Select the Correct Answer
$500.
$2,500.
$5,000.
$2,000.

Answer 4

$2,000. is correct.

EXPLANATION:
Supplementary payments include the cost of a bail bond up to $2,000 including bonds for related traffic offenses required because of a covered accident.

Question 5

A standard Homeowners policy has been issued with a $300,000 limit to cover a four-family dwelling. What is the automatic amount that will be provided for Coverage C?

Answer Choices: Select the Correct Answer
$150,000.
$90,000.
$75,000.
$30,000.

Answer 5

$75,000. is correct.

EXPLANATION:
When a four-family dwelling is covered with a Homeowners policy, 25% of the Coverage A limit is automatically provided for Coverage C - Personal Property coverage. 25% of $300,000 is $75,000.

Question 6

Which of the following statements is TRUE regarding endorsements to a Commercial General Liability policy?

Answer Choices: Select the Correct Answer
The Liquor Liability Coverage Form endorsement provides coverage for businesses that serve alcohol at company parties and picnics.
The Nuclear Energy Liability Exclusion endorsement excludes coverage for a business or person who is listed as an insured under another liability policy issued by a nuclear risk insurance company.
The Laser Beam Exclusion endorsement can be used with either an occurrence or a claims-made CGL policy.
The Pollution Liability Extension endorsement provides for the clean-up costs that are a result of a pollution incident.

Answer 6

The correct answer is: The Nuclear Energy Liability Exclusion endorsement excludes coverage for a business or person who is listed as an insured under another liability policy issued by a nuclear risk insurance company.

EXPLANATION:
The only answer choice that is TRUE is: “The Nuclear Energy Liability Exclusion endorsement excludes coverage for a business or person who is listed as an insured under another liability policy issued by a nuclear risk insurance company.”

Question 7

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

Answer Choices: Select the Correct Answer
The Inchmaree clause.
Protection and indemnity coverage.
Hull coverage.
Barratry.

Answer 7

The Inchmaree clause. is correct.

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

Question 8

Farmer Alex has his credit card stolen while he is at the farmer’s market one day. The thief charges $2,000 to the card before Alex can cancel the card. Which of the following statements best describes how Alex’s loss would be covered under his Farm Property policy?

Answer Choices: Select the Correct Answer
His loss would be covered by the extensions of coverage.
His loss would be covered by Coverage C.
There is not coverage for this type of loss.
His loss would be covered under the additional coverages.

Answer 8

His loss would be covered under the additional coverages. is correct.

EXPLANATION:
Alex’s loss would be covered under the Additional Coverage - Credit Card and Electronic Fund Transfer Cards or Other Access Devices; Forgery; or Counterfeit Currency.

Also Under Additional Coverages:
- Removal of Fallen Trees
- Credit Card
- Water Damage
- Grave Markers - $5k

Question 9

The additional coverage of the Commercial Property cause of loss forms known as the “Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria” provides:

Answer Choices: Select the Correct Answer
$10,000 for all occurrences within the policy period.
$15,000 coverage for all occurrences within a 12-month period.
$5,000 coverage for all occurrences within the policy period.
$10,000 coverage for all occurrences within a 12-month period.Section I of the Homeowners forms provides up to ________ when the insured is assessed by a corporation or property owner’s association for damage to property owned collectively, but only if it was damaged by a peril insured against under Coverage A of the policy.

Answer Choices: Select the Correct Answer
$250.
$1,500.
$500.
$1,000.

Answer 9

$1,000. is correct.

EXPLANATION:
Section I of the Homeowners policy provides as an “additional coverage” $1,000 when the insured is assessed by a corporation or property owner’s association for damage to property owned collectively, but only if it was damaged by a peril insured against under Coverage A of the policy.

Question 10

Under a DP-2 or DP-3 standardized policy what is the maximum that would be paid for one month for additional living expenses if Coverage A was $75,000?

Answer Choices: Select the Correct Answer
$1,250
$500
$1,000
$750

Answer 10

$1,250 is correct.

EXPLANATION:
The form provides 20% of Coverage A for additional living expense under the DP-2 and DP-3. Therefore, $75,000 X 20% = $15,000. This amount divided by 12 months = $1,250/month.

Question 11

Pete’s Plumbing, Inc. has two identical Business Auto policies written by Indemnify Insurance, Inc. The policies cover the five autos Pete’s employees use each work day. One afternoon an employee backs a covered vehicle into a telephone pole and dents the rear of the vehicle. Which of the following statements best describes how this loss will be paid?

Answer Choices: Select the Correct Answer
The policy with the highest limit will pay as primary and the policy with the lowest limit will pay as excess.
The lowest policy limit of ONE of the policies covering the vehicle is the most that will be paid.
Both policies will cover the damage according to each policy’s pro-rata share.
The highest policy limit of ONE of the policies covering the vehicle is the most that will be paid.

Answer 11

The correct answer is: The highest policy limit of ONE of the policies covering the vehicle is the most that will be paid.

EXPLANATION:
The highest policy limit of ONE of the policies covering the vehicle is the most that will be paid for the damage. This is because the same insurer provides coverage under both policies and one of those policies was not written as excess insurance.

Question 12

A person takes bank deposits to the bank every day for a business. In Commercial Crime insurance terminology, this person is known as a:

Answer Choices: Select the Correct Answer
Messenger.
Custodian.
Cashier.
Manager.

Answer 12

The correct answer is: Messenger.

EXPLANATION:
This person is called a messenger. A messenger has custody of the insured’s property outside the insured’s premises.

Question 13

Which of the following would be covered under Part Two - Employer’s Liability of a standard workers’ compensation policy?

Answer Choices: Select the Correct Answer
Contractual liability.
The employee sues the employer for emotional stress due to termination.
The spouse of an injured employee sues the employer for loss of care and services (consortium).
Injury to an employee due to exhaustion after working too much overtime.

Answer 13

The correct answer is: The spouse of an injured employee sues the employer for loss of care and services (consortium).

EXPLANATION:
Part Two - Employer’s Liability under a Workers Compensation policy excludes coverage for injuries outside the coverage territory, employment practices and contractual liability. Coverage would apply, however, to a claim against the employer brought by a related third party, alleging loss-of-services due to a work-related injury to an employee.

Question 14

Which of the following is NOT TRUE of the continuing education requirements of California adjusters?

Answer Choices: Select the Correct Answer
24 CE credit hours must be reported to the Commissioner on a biennial basis.
3 CE credit hours must be taken covering the subject of ethics.
21 CE credit hours must be taken covering topics pertinent to the duties and responsibilities of a licensed insurance adjuster.
21 CE credit hours may be taken covering any topic the licensee deems pertinent to their business.

Answer 14

21 CE credit hours may be taken covering any topic the licensee deems pertinent to their business. is correct.

EXPLANATION:
The answer choice that is NOT TRUE is: “21 CE credit hours may be taken covering any topic the licensee deems pertinent to their business.” The licensed adjust cannot simply take a course they might find interesting or motivating to meet their continuing education requirement. The courses taken must be pertinent to the duties and responsibilities of a licensed adjuster.

Question 15

The doctrine of utmost good faith is supported by all of the following legal principles, EXCEPT:

Answer Choices: Select the Correct Answer
Warranty.
Representation.
Concealment.
Subrogation.

Answer 15

The correct answer is: Subrogation.

EXPLANATION:
Subrogation has nothing to do with the doctrine of utmost good faith.

Question 16

Under the additional coverages of the standardized Businessowners policy, how much is the limit for “Pollutant Clean-Up and Removal” if caused by a covered loss?

Answer Choices: Select the Correct Answer
$10,000 in any 12-month period.
An additional $25,000 if the policy limits are exhausted when paying for the actual loss.
25% of the loss as long as it does not exhaust the policy limits.
$10,000 during the entire policy period.

Answer 16

The correct answer is: $10,000 in any 12-month period.

EXPLANATION:
The policy pays up to $10,000 in each policy year for “Pollutant Clean-Up and Removal”.

Question 17

What is the limit of coverage provided under a Mobile Homeowners policy for “other structures”?

Answer Choices: Select the Correct Answer
$2,000.
10% of the Coverage A limit or $2,000 whichever is greater.
$5,000 per structure.
Coverage for “other structures” must be added by endorsement.

Answer 17

10% of the Coverage A limit or $2,000 whichever is greater. is correct.

EXPLANATION:
The limit is $2,000 or 10% of the Coverage A (dwelling limit), whichever is greater.

Question 18

Mary’s Maids, Inc. wants to cover a fleet of sedans used by the maids to travel to the homes they are servicing. Which of the following symbols would most likely be scheduled on the Declarations page of Mary’s a Business Auto form?

Answer Choices: Select the Correct Answer
Symbol 1.
Symbol 2.
Symbol 3.
Symbol 4.

Answer 18

Symbol 3. is correct.

EXPLANATION:
Symbol 3 would be used as a fleet of private passenger vehicles owned by the named insured would be covered.

Question 19

Which of the following are covered by the Federal Employers’ Liability Act (FELA)?

Answer 19

The correct answer is: Employees of interstate railroads.

EXPLANATION:
The Federal Employers’ Liability Act (FELA) applies to employees of interstate railroads. Like the Jones Act, it allows workers or the survivors of deceased workers to sue their employers for occupational injuries resulting from the employer’s negligence.

Question 20

Which of the following is a “broad form” peril of a Homeowners policy?

Answer Choices: Select the Correct Answer
Explosion.
Vandalism or malicious mischief.
Volcanic eruption.
Discharge of water or steam.

Answer 20

Discharge of water or steam. is correct.

EXPLANATION:
Discharge of water or steam is the only one of the answer choices that is a “broad form” peril. The other answer choices are basic form perils of a Homeowners policy.

Question 21

A business auto policy has a $100,000 limit of insurance for liability coverage. As a result of an automobile accident involving a covered auto, two people are injured. The first injured party sues the named insured and wins a $150,000 judgment. The insurer pays its limit of insurance. If the other injured party later sues the insured, the insurer will:

Answer Choices: Select the Correct Answer
Either defend or settle the suit.
Pay up to $100,000 of the damages the injured party is awarded.
Pay a negotiated amount.
Deny further obligations to the insured as a result of the other injured party.

Answer 21

Deny further obligations to the insured as a result of the other injured party. is correct.

EXPLANATION:
The duty of the insurer ends when it has exhausted its limits by the payment of claims as a result of a single covered claim.

Question 22

Jim and Liz are a married couple who have their three of their owned vehicles covered by a standard Personal Automobile policy. Liz is an executive with a major insurance company that provides her with a company car so she decides to add the “Extended Nonowned Coverage Endorsement” to the couple’s existing Personal Automobile policy. Adding this endorsement will:

Answer Choices: Select the Correct Answer
Provide for additional exclusions to coverage for family members while driving cars other than the covered autos including Liz’s company car.
Allow for anyone covered by the policy to use the covered vehicles including Liz’s company car to drive for a Transportation Network Company.
Extend the exclusions already provided under the current policy to provide coverage only for Liz while driving the company car.
Provide liability coverage and medical payments (if Liz chooses that option) to cover the named insured or a family member if they drive Liz’s company car.

Answer 22

Provide liability coverage and medical payments (if Liz chooses that option) to cover the named insured or a family member if they drive Liz’s company car. is correct.

EXPLANATION:
The “Extended Nonowned Coverage Endorsement” provides liability coverage and medical payments (if Liz chooses that option) to cover the named insured or a family member if they drive Liz’s company car.

Question 23

The Watercraft Endorsement to the Homeowners policy provides:

Answer Choices: Select the Correct Answer
Workers Compensation coverage for the crew of a scheduled sailing vessel.
Watercraft Physical Damage coverage.
Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy.
Coverage for small canoes and kayaks.

Answer 23

Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy. is correct.

EXPLANATION:
The Watercraft Endorsement provides Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy for watercraft.

Question 24

All of the following statements are TRUE regarding the standard Businessowners policy coverage extension for “Business Personal Property Temporarily in Portable Storage Units”, EXCEPT:

Answer Choices: Select the Correct Answer
The coverage extension provides $10,000 of coverage.
The coverage is provided for 90 days.
The coverage is provided for rented storage units away from the insured premises.
The term “portable storage unit” can include “detached trailers”.

Answer 24

The coverage is provided for rented storage units away from the insured premises. is correct.

EXPLANATION:
The coverage DOES NOT extend to rented storage units away from the insured premises.

Question 25

All of the following would be considered an “insured” on a Homeowners policy, EXCEPT:

Answer Choices: Select the Correct Answer
All residents who are related to the named insured.
A trust.
A non-related minor being cared for by the named insured’s family.
A non-related tenant living in the insured residence.

Answer 25

A non-related tenant living in the insured residence. is correct.

EXPLANATION:
A tenant would be considered an “insured” under their own HO-4 policy that covers their personal property. However, a non-relative who is a tenant living in the insured’s residence, is not considered an “insured” under the policy.

Question 26

Which of the following statements is NOT TRUE about the coverage provided under the Employers Liability section of a workers’ compensation policy?

Answer Choices: Select the Correct Answer
The bodily injury must have been caused or aggravated by the conditions of the employment.
The bodily injury must arise out of and in the course of the employment.
The bodily injury must also be covered for statutory benefits.
The lawsuit for bodily injury may be brought in Canada.

Answer 26

The bodily injury must also be covered for statutory benefits. is correct.

EXPLANATION:
The answer choice that is NOT TRUE is: “The bodily injury must also be covered for statutory benefits.” When the injury IS covered by statutory workers’ compensation, Employers Liability will not apply.

Question 27

A dead tree beside Jerry’s home is best described as which of the following types of hazards?

Answer Choices: Select the Correct Answer
Physical hazard.
Proximate hazard.
Moral hazard.
Morale hazard.