Fire & Casualty Practice Exam 5

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Fire & Casualty Practice Exam 5 - For personal use only

  
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  • 1. 
    What gives an insured party the right to seek compensation if it is proven that another person with negligence contributed to the injury ?
    • A. 

      Statutory code

    • B. 

      Tort law

    • C. 

      Criminal code

    • D. 

      Case law


  • 2. 
    Surplus lines brokers
    • A. 

      Are always employees of insurance companies

    • B. 

      Transact business only with admitted insurers

    • C. 

      Specialize in marine insurance

    • D. 

      Transact business only with non-admitted insurers


  • 3. 
    Which of the following is an insurer's option when making a loss settlement with the insured under a personal auto policy ?
    • A. 

      Return stolen property to the address shown in the policy

    • B. 

      Have the insured purchaser place the auto at an auto auction

    • C. 

      Demand that the insured first attempt to settle with the responsible party

    • D. 

      Instruct the insured to repair the vehicle at a designated shop


  • 4. 
    What steps need to be taken to terminate a licensee's license that is in the possession of an employer
    • A. 

      The employer must return the license to the licensee, who then must return the license to the insurance commissioner

    • B. 

      The licensee must give written notice to the employer who then sends the license to the insurance commissioner

    • C. 

      The license cannot be terminated prior to the expiration date; it becomes inactive

    • D. 

      The licensee needs to give written notice of intent to the insurance commissioner


  • 5. 
    What will happen when an agent's appointment to an insurance company is terminated and the agent has no other appointments with any other insurance company ?
    • A. 

      The agent's permanent license becomes inactive

    • B. 

      The agent's permanent license remains fully active until expiration

    • C. 

      The agent's permanent license remains in force for only 60 more days unless the agent becomes reappointed or receives a new appointment letter from another insurer

    • D. 

      The agent's permanent license will be terminated simultaneously


  • 6. 
    Which of the following is covered by a building and personal property coverage form (BPP) ?
    • A. 

      A patio

    • B. 

      A bridge

    • C. 

      A light pole

    • D. 

      A dock


  • 7. 
    A physician may have misdiagnosed a patient for terminal cancer.  what type of insurance would protect the physician for this type of mistake ?
    • A. 

      Personal liability

    • B. 

      Professional liability

    • C. 

      Health insurance

    • D. 

      Allied lines insurance


  • 8. 
    What is one of the principle rating factors under Proposition 103 allowed for personal auto policies ?
    • A. 

      Credit record

    • B. 

      Year of the auto

    • C. 

      Safety driving record

    • D. 

      Make of the auto


  • 9. 
    What coverage is available under the named non-owner coverage endorsement ?
    • A. 

      Physical damage and uninsured motorist

    • B. 

      Liability, medical payments, and uninsured motorist

    • C. 

      Liability and physical damage

    • D. 

      Liability only


  • 10. 
    Which of the following is considered special damages ?
    • A. 

      Compensation for a person's emotional suffering

    • B. 

      Compensation for time away from work

    • C. 

      Compensation for loss of a foot

    • D. 

      Compensation for a scar


  • 11. 
    All of the following are mandatory coverages of a business owner's policy, except:
    • A. 

      Extra expense coverage

    • B. 

      Professional liability coverage

    • C. 

      Building coverage

    • D. 

      Business income coverage


  • 12. 
    An agent who diverts premium dollars for the agent's own use is guilty of
    • A. 

      Theft

    • B. 

      Fraud

    • C. 

      Forgery

    • D. 

      Misrepresentation


  • 13. 
    Every admitted insurer in the state of California is required to maintain a unit or disivion to investigate which of the following ?
    • A. 

      Possible non-justifiable discrimination

    • B. 

      Possible fraudulent claims made by insureds

    • C. 

      Possible non-compliance with CA rate laws

    • D. 

      Possible arson claims


  • 14. 
    Which of the following would be considered special damages ?
    • A. 

      Scarring

    • B. 

      Loss of an index finger

    • C. 

      Lost wages

    • D. 

      Pain and suffering


  • 15. 
    Which of the following is a common policy condition for a commercial package policy ?
    • A. 

      Causes of loss

    • B. 

      Duty to defend

    • C. 

      Pro-rata clause

    • D. 

      Inspections and surveys


  • 16. 
    Insurance which covers ship owners against vicarious liability claims due to operating the insured vessel is:
    • A. 

      A voyage policy

    • B. 

      Hull insurance

    • C. 

      The sue and labor laws

    • D. 

      Protection and indemnity insurance


  • 17. 
    Which advisory organization(s) develop forms for the standard market
    • A. 

      National Association of Insurance Commissioners and the American Association of Insurance Services

    • B. 

      Insurance Services Office

    • C. 

      National Association of Insurance Commissioners and the Insurance Services Office

    • D. 

      Insurance Services Office and the American Association of Managing General Agents


  • 18. 
    What is one of the main factors that the insurance Commissioner uses while determining whether a rate is excessive or unfairly discriminatory
    • A. 

      Whether the rate mathematically reflects the insurance company's investment income

    • B. 

      How long the insurer has been admitted to do business in the state

    • C. 

      Complaint history of the insurer by insureds

    • D. 

      The degree of competition


  • 19. 
    Which of the following perils is covered by a causes of loss - basic form
    • A. 

      Governmental action

    • B. 

      War

    • C. 

      Riot or civil commotion

    • D. 

      Ordinance or law


  • 20. 
    The commercial property policy part - " causes of loss - borad form " includes an exclusion for "concurrent causation". The effect of this exclusion is
    • A. 

      If two or more perils happen at the same time to cause a loss, there is no coverage if any of the perils are excluded.

    • B. 

      If two or more perils happen at the same time to cause a loss, there is coverage for all of the damage if any of the perils are not excluded.

    • C. 

      If a loss occurs concurrently with the expiration date of the policy, it is not covered

    • D. 

      If two or more perils happen at the same time to cause a loss, then only the damage caused by one of the perils is covered


  • 21. 
    A health insurance deductible is
    • A. 

      The cost of a covered expense minus a co-payment

    • B. 

      The portion of the insurance premium paid for coverage by the insured

    • C. 

      The insurance payment for health care that is not considered a covered expense

    • D. 

      The amount of covered expense that the insured pays before the insurer pays


  • 22. 
    Which of the following is eligible for a business owner's policy
    • A. 

      An auto repair shop

    • B. 

      A credit union

    • C. 

      A furniture store

    • D. 

      A sports bar


  • 23. 
    All of the following are listed on a commercial general liability declarations page, except
    • A. 

      Medical expense limit

    • B. 

      Rent it to you limit

    • C. 

      Personal advertising injury limit

    • D. 

      Pollution liability limit


  • 24. 
    The term "subrogation" refers to
    • A. 

      The insured's right to receive broadened coverage at no extra charge

    • B. 

      The insurance policy applies separately to each insured

    • C. 

      The insurer's right to recover payment from a responsible 3rd party

    • D. 

      The insurance firm insured's interest in a policy to another party


  • 25. 
    All of the following statements concerning business owner's policies are true, except:
    • A. 

      It allows insurers to individually underwrite the smaller, low-premium policies

    • B. 

      It contains simpler reading which lower handling costs for insurers

    • C. 

      Insureds have the benefit of additional coverages that might otherwise be overlooked

    • D. 

      Insureds have the convenience of one policy that meets most of their needs at a reduced premium cost


  • 26. 
    Under an unendorsed personal auto policy, what coverage is available for personal effects ?
    • A. 

      None

    • B. 

      Luggage and clothing up to $500

    • C. 

      Luggage up to $200

    • D. 

      All personal property in the auto up to $500


  • 27. 
    A home is damaged minutes after an earthquake, first by fire, then by fuel pipes bursting and causing an explosion.  Under an HO-3 form:
    • A. 

      There is no coverage unless the homeowner has made an earthquake coverage endorsement a part of the policy

    • B. 

      The policy covers all of the damage since explosion is an insured peril

    • C. 

      There is coverage, but only for the damage caused by the fire and explosion

    • D. 

      The policy does not cover the damage since the HO-3 provides only named peril coverage


  • 28. 
    The insurer's right to recover its claim payment to an insured from a negligent 3rd party is known as:
    • A. 

      Arbitration

    • B. 

      Liberalization

    • C. 

      Subrogation

    • D. 

      Assignment


  • 29. 
    All of the following are requirements for a notice by mail to an insured by an insurer, except
    • A. 

      Notice must be mailed to the residence or principal place of business

    • B. 

      Notice must be sent with return receipt required

    • C. 

      Notice must be addressed to the person being notified

    • D. 

      Postage must be prepaid


  • 30. 
    The term "assignment" refers to
    • A. 

      The insurance policy applying to each insured

    • B. 

      The insurer's right to collect damages from a 3rd party

    • C. 

      The transfer of the insureds interest in a policy to another party

    • D. 

      The insureds right to receive broad new coverage from the insurer at no charge


  • 31. 
    Which of the following statements is true regarding insurers with admitted status in California ?
    • A. 

      They may use race, color, religion or national origin as a condition to use higher rates

    • B. 

      They may use any rating methods that are actuarially sound in rating the policy

    • C. 

      They may not use race, color, religion or national origin as a condition to use high rates

    • D. 

      They must file for an exemption with the insurance commisioner if they wish to use race, color, religion or national origin as a rating condition


  • 32. 
    A person can base his/her claim for legal liability on the basis of all the following, except:
    • A. 

      Absolute liability

    • B. 

      Breach of contract

    • C. 

      Intentional tort

    • D. 

      Negligence


  • 33. 
    If the named insured is not the owner of the building, improvements and betterments are covered under the
    • A. 

      Agreed value

    • B. 

      Newly constructed property

    • C. 

      Business personal property

    • D. 

      Building


  • 34. 
    Under the commercial building and personal property coverage extensions, property off-premises is covered while the property is located:
    • A. 

      In a building the named insured has leased for five years

    • B. 

      At a trade fair

    • C. 

      In a delivery truck

    • D. 

      At a salesperson's home


  • 35. 
    If the vacancy permit endorsement is added to a building and personal property coverage form, the vacancy condition under the basic policy is:
    • A. 

      Waived after the policy period

    • B. 

      Waived only the designated perils during the policy period

    • C. 

      Waived during the permit period

    • D. 

      Waived only for designated perils during the permit period


  • 36. 
    In order to receive the principal sum benefit for death from a disability income policy, death must occur
    • A. 

      Within a specified number of days after injury

    • B. 

      Any time during the total dismemberment period

    • C. 

      Any time during a rehabilitation period

    • D. 

      Within the policy period for any cause


  • 37. 
    Which of the following describes the act of making a false entry in any book, statement or report of any insurer with the intent to deceive any agent, examiner lawfully appointed to examine the affairs of the insurer ?
    • A. 

      An aleatory act

    • B. 

      An error or omission

    • C. 

      An exclusionary act

    • D. 

      An unfair practice


  • 38. 
    Under the business income coverage form, extra expenses are
    • A. 

      Covered without limit during the period of restoration

    • B. 

      Excluded

    • C. 

      Covered up to the amount they reduce the business income loss

    • D. 

      Covered up to the monthly limit specified in the declarations


  • 39. 
    If an insured purchases an all-terrain vehicle (ATV), what endorsement can be added to the personal auto policy to insure the vehicle ?
    • A. 

      ATV endorsement

    • B. 

      Recreational vehicle endorsement

    • C. 

      There is no endorsement available for this exposure

    • D. 

      Miscellaneous type vehicle endorsement


  • 40. 
    All of the following are areas that market regulation covers, except:
    • A. 

      Employee training

    • B. 

      Underwriting

    • C. 

      Sales

    • D. 

      Rate-making


  • 41. 
    All of the following are covered by protection and indemnity insurance, except:
    • A. 

      Injury to persons on other ships

    • B. 

      Injured passengers on the ship

    • C. 

      The cost of reasonable measures that the insured must take to prevent damage at the time of loss

    • D. 

      Damage to piers


  • 42. 
    Under an unendorsed personal auto policy, transportation expense coverage applies to
    • A. 

      Theft only losses

    • B. 

      Collision and other-than-collision losses

    • C. 

      Other-than-collision losses only

    • D. 

      None. There is no coverage


  • 43. 
    Which of the following is an example of loss prevention?
    • A. 

      A homeowner decides not to install a pool in the backyard

    • B. 

      A homeowner decides not to restore water damage to basement

    • C. 

      A homeowner installs a home sprinkler system

    • D. 

      A homeowner installs a home security system


  • 44. 
    All of the following are typical exclusions in an inland marine policy, except:
    • A. 

      Insects or vermin

    • B. 

      Earth movement

    • C. 

      Wear and tear

    • D. 

      Electrical breakdown


  • 45. 
    An organization will cease to exist as an entity eligible to hold a license for all of the following reasons, except:
    • A. 

      Termination of key employee

    • B. 

      Dissolution of a co-partnership

    • C. 

      Dissolution of a corporation

    • D. 

      Termination of an association


  • 46. 
    An insurer's loss reserve for a claim is
    • A. 

      The exact amount the insurer will have to pay to close the claim

    • B. 

      An estimate of the amount the insurer will pay

    • C. 

      The maximum amount the insurer will have to pay to close the claim

    • D. 

      Equal to claims paid divided by earned premium reserve, not including loss of adjustment expense


  • 47. 
    What coverage is available under the miscellaneous type vehicle endorsement
    • A. 

      Physical damage only

    • B. 

      All coverage under the personal auto policy

    • C. 

      Liability and physical damage only

    • D. 

      Liability only


  • 48. 
    If an individual does not own an auto nor have a regular use of an auto, what endorsement to a personal auto policy could be used to properly protect that individual ?
    • A. 

      Named non-owned coverage endorsement

    • B. 

      No coverage available

    • C. 

      Extended non-owned liability coverage endorsement

    • D. 

      Miscellaneous type vehicle endorsement


  • 49. 
    An insured has a personal auto policy but does not pay the initial insurance premium when it is due.  The insurer cancels the policy for non-payment.  How many days notice must the insurer give ?
    • A. 

      5

    • B. 

      10

    • C. 

      15

    • D. 

      20


  • 50. 
    The watercraft endorsement on a homeowner's extends coverage for
    • A. 

      Liability coverage for all owned watercraft

    • B. 

      Physical damage and liability coverage for all owned watercraft

    • C. 

      Liability coverage for watercraft listed on the schedule

    • D. 

      Physical damage and liability coverage for watercraft listed on the schedule


  • 51. 
    After a collision loss, the personal auto policy requires the insured to:
    • A. 

      Submit a written notice of the loss to the company

    • B. 

      Promptly notify the police of the accident

    • C. 

      Press charges against the other party

    • D. 

      Allow the company to inspect the damaged property before it is repaired.


  • 52. 
    Which coverages are typically provided in a boat owner's policy ?
    • A. 

      Hull and collision

    • B. 

      Hull, running down, and protection and indemnity

    • C. 

      Property, liability, and medical payments

    • D. 

      Physical damage, liability and medical payments


  • 53. 
    Which of the following is considered an intentional tort?
    • A. 

      Auto accident

    • B. 

      Blasting operations

    • C. 

      Unauthorized release of confidential information

    • D. 

      Ownership of a pet rattlesnake


  • 54. 
    What is the purpose of the inspections and surveys condition of the commercial package policy?
    • A. 

      To determine if the premises comply with ADA requirements

    • B. 

      To ascertain if the premises has maintained the required building codes

    • C. 

      To determine the rate to be charged

    • D. 

      To specify if the premises comply with OSHA requirements


  • 55. 
    Which of the following statements is true regarding compensatory damages?
    • A. 

      General damages have specific economic value

    • B. 

      Punitive damages are awarded to a person for actual pain and suffering

    • C. 

      Special damages do not have a specific economic value

    • D. 

      There is usually no direct correlation between the amount of general and special damages awarded to the victim


  • 56. 
    When does a personal auto policy require the insured to notify the police?
    • A. 

      For thefts only

    • B. 

      There is no requirement to notify the police

    • C. 

      For hit and run accidents and thefts

    • D. 

      For all accidents and thefts


  • 57. 
    What coverage is available under the extended non-owned liability coverage ?
    • A. 

      Liability, medical payments, and uninsured motorist

    • B. 

      Liability and physical damage

    • C. 

      Liability and medical payments

    • D. 

      Liability only


  • 58. 
    Why is the examination of books and records condition important in a commercial policy ?
    • A. 

      To ensure that the insurance business is profitable

    • B. 

      To ensure that the insurer is using generally accepted accounting principles

    • C. 

      To ensure that the proper amount of premium is charged

    • D. 

      To ensure that the insurance business is solvent


  • 59. 
    What is the limit per day for transportation expenses in under -an unendorsed personal auto policy
    • A. 

      $10

    • B. 

      $15

    • C. 

      $20

    • D. 

      None


  • 60. 
    Which homeowners form is best for use on a brand-new single family dwelling
    • A. 

      HO-4

    • B. 

      HO-5

    • C. 

      HO-6

    • D. 

      HO-8


  • 61. 
    The inspections and surveys condition of a commercial package policy is important to the insurer for all of the following reasons, except
    • A. 

      Make loss control recommendations

    • B. 

      Guarantee that the insured is incompliance with safety regulations

    • C. 

      To set proper insurance rates

    • D. 

      To determine the insurability of the insured's operations


  • 62. 
    What is the main purpose of Tort law?
    • A. 

      To minimize the amount of insurance claims made

    • B. 

      To determine responsibility for damages

    • C. 

      To prosecute the responsible party

    • D. 

      To assign punitive damages to the responsible party


  • 63. 
    If an insured discovers an occurrence 75 days after the expiration of a claims-made commercial general liability policy, what must the insured have in order for the loss to be covered ?
    • A. 

      Supplemental standard reporting period endorsement

    • B. 

      Umbrella Policy

    • C. 

      The loss will not be covered because it was not reported during the policy period

    • D. 

      Nothing; as long as the loss occurred during the policy period


  • 64. 
    When an employer has a choice to purchase workers compensation insurance from a state fund or a private carrier, the state fund wold be called
    • A. 

      A competitive state fund

    • B. 

      A residual fund

    • C. 

      A monopolistic fund

    • D. 

      A private fund


  • 65. 
    What causes of loss are covered under the business income coverage form ?
    • A. 

      Those shown on the declarations

    • B. 

      All perils

    • C. 

      Those included in the business income form

    • D. 

      Broad form perils only


  • 66. 
    A commercial general liability (CGL) policy is quite broad in scope.  However, there are a substantial number of exclusions. Three of the four following loss exposures are excluded.  Identify the loss exposure that is covered by an unendorsed CGL.  Property damage or liability arising out of
    • A. 

      The ownership of an airplane

    • B. 

      An employee being injured while working on the insured's premises

    • C. 

      An accident while driving an owned automobile on a public highway

    • D. 

      An employee accidentally injures a customer while working at the customer's home


  • 67. 
    What is one way in which the HO-2, HO4 and HO-6 are similar.
    • A. 

      Perils insured against under coverage A

    • B. 

      The limits provided for under coverage B

    • C. 

      Perils insured against under coverage C

    • D. 

      The limits provided for under coverage C


  • 68. 
    The ordinance or law exclusion/limitation in a homeowner's policy may cause a gap in coverage in which of the following situations?
    • A. 

      A law requires all swimming pools on a residential property to be fenced and to have self-closing gates. The insured's gate is not self-closing, and the neighbor's child goes through the gate and is severely injured when he falls into the insured's pool.

    • B. 

      The insured has a business occupancy that is permitted by homeowner's rule and does not affect his coverage. However, local community laws prohibit the occupancy unless certain approvals are obtained and fees are paid. The insured has not obtained approvals nor paid fees prior to windstorm damage to home

    • C. 

      The insured's home is damaged by fire and must be rebuilt to meet present building codes. The additional cost of complying with the codes is 50%.

    • D. 

      A community ordinance requires dogs to be on a leash. The insured's dog, running free in a park, bites a child


  • 69. 
    What additional coverage does a DP-2 have compared to DP-1?
    • A. 

      Additional living expenses

    • B. 

      Improvements, alterations and additions

    • C. 

      Personal liability

    • D. 

      Debris removal


  • 70. 
    Which of the following collapse losses would be covered under an HO-3
    • A. 

      Known insect damage

    • B. 

      Weight of contents

    • C. 

      Defective workmanship completed two years ago

    • D. 

      Earth movement from a volcanic eruption


  • 71. 
    Coverage under a comprehensive personal liability policy or a homeowner's section 2 extends
    • A. 

      Only to the premises described in the policy

    • B. 

      To the premises described and to the personal activities of the insureds on or off of the described premises

    • C. 

      Only to the personal activities of the insureds

    • D. 

      To the premises described and to all personal and business activities of the insureds on or off the described premises.


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